Think you know your stuff when it comes to retirement? Great if that were true, because according to a recent report, the average U.S. adult can’t pass a short retirement fluency test.
The TIAA Institute, a think tank within financial services firm TIAA, distributed a five-question quiz on retirement fundamentals to nearly 4,000 adults in January — and on average, respondents scored just 40%.
The percentage of people who answered zero questions correctly (19%) was about the same as those who answered four or more questions correctly (17%).
Perhaps unsurprisingly, greater confidence in retirement correlates with better test scores. Twenty-six percent of respondents who answered four or more questions correctly said they were very confident they would have enough money to live comfortably in retirement. Only 7% of those who were not at all sure scored the same.
People who were closer to or already retired also tended to perform better than those who were not. Members of the “Silent Generation,” born approximately between 1928 and 1945, answered an average of 50% of the questions correctly. New Gen Z adults, however, only answered an average of 28% correctly.
Test your knowledge
Are you fluent in retirement? Below are the five exact questions (and answers) from the TIAA Institute survey.
1. Which statement about Social Security is false?
A) The amount someone receives in Social Security benefits depends on their income during the last two years of full-time work.
B) A worker receives Social Security benefit payments if he becomes disabled before retiring.
C) Social Security benefit payments will continue as long as the individual is alive, regardless of how long he or she lives.
D) I don’t know.
2. Susan worries about living a long life and running out of money. What is the best way for you to approach this possibility?
A) Buy an annuity.
B) Purchase life insurance.
C) There is nothing you can do about it.
D) I don’t know.
3. On average, what portion of a retired individual’s health care expenses are covered by Medicare and other government programs?
A) Over 90%.
B) About 2/3.
C) About 1/2.
D) I don’t know.
4. Latisha plans to start saving for retirement by putting aside $2,000 this year. Her employer offers a 401(k) plan and fully matches the employee’s contributions up to $5,000 each year. In which scenario does Latisha have the largest amount of retirement savings at the end of the year?
A) He contributes $2,000 to his 401(k) plan and invests the money in a mutual fund that earns a 5% return over the year.
B) Contributes $2,000 to an IRA and invests the money in a mutual fund that earns a 5% return over the year.
C) It doesn’t matter: in any case he will have the same amount of savings at the end of the year.
D) I don’t know.
5. On average, in the United States, how long will a 65-year-old man/woman live?
A) Man aged 79 years, woman aged 82 years.
B) Man aged 84 years, woman aged 87 years.
C) Man aged 89 years, woman aged 92 years.
D) I don’t know.
Answers: A, A, B, A, B.
How did you do?
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