‘Retirement Fluency’ Not Evolving

Adult Americans’ understanding of retirement-related topics has not evolved despite advancements in technology and access to information, according to the 2024 TIAA Institute and Global Financial Literacy Excellence Center Personal Finance Index.

As poor financial decisions often correlate with low levels of financial literacy, the findings are a cause for concern that U.S. adults consistently struggle to understand retirement-related topics, according to the findings.

On average, U.S. adults only correctly answered 48% of the 28 financial literacy questions in the survey, a figure that has hovered around the 50% mark since the inaugural research in 2017.

Beyond teaching more financial literacy education in primary and secondary schools, authors of the report argued that policymakers should design initiatives and programs specifically targeted to Black and Hispanic workers, who display much lower levels of financial literacy.

The lack of “retirement fluency” is also a signal to employers that more education is needed on topics like Medicare, longevity and retirement income. Authors of the report included Paul Yakoboski at the TIAA Institute, Annamaria Lusardi at Stanford University and GFLEC and Andrea Sticha at Stanford Graduate School of Business and GFLEC.

TIAA and GFLEC noted that financial literacy significantly varied based on the respondents’ sociodemographic characteristics.

For example, financial literacy among women has consistently lagged behind that of men. That continues this year as there was a 10-point gender gap in the percentage of index questions correctly answered in 2024. 

Black and Hispanic Americans also scored lower than Asian and white Americans, and Gen Z respondents only correctly answered 37% of the questions.

Five questions in the 2024 P-Fin Index survey were specifically used to gauge basic “retirement fluency,” or knowledge that promotes financial well-being in retirement, focused on the following five topics: Social Security benefits, Medicare coverage of health care expenses, employment-based retirement savings, ensuring lifetime income and life expectancy in retirement.

Respondents struggled most with questions about Medicare coverage and life expectancy, as only 30% of adults had a general understanding of Medicare’s average coverage rate of health care expenses in retirement, and only 32% knew how long people tend to live upon reaching retirement age.

On the other hand, more than half of all respondents (53%) knew that annuities provide lifetime income.

As a whole, TIAA and GFLEC found that retirement fluency was low among U.S. adults. On average, respondents correctly answered two questions out of the five. Only 4% of respondents were able to answer all five correctly.

Retirement fluency was found to be linked to retirement income security, as 26% of those who correctly answered four or five of the retirement fluency questions said they are “very confident” they will have enough money to live comfortably throughout retirement, while only 7% of those groups are not at all confident.

This survey was conducted online in January of this year, sampling 3,876 individuals, ages 18 and older.