Wishful Thinking Is not a Good Retirement Plan
Knowledge has its limits. Just because you know all the reasons you should do something, doesn't mean you'll actually do it. For example, there are nurses who smoke cigarettes, paramedics who drive recklessly, and estate attorneys who haven't written out their own wills. This apparent heedlessness is just a part of human nature. At least if you have the knowledge, you can make an informed decision about whether or not to act on it.
Researchers at Ohio State University analyzed data from various studies, including a large-scale financial literacy survey, and found a surprising trend among those with the lowest scores: They were much more likely to say that they were never going to retire.1
The researchers looked at data from a financial literacy assessment tool known as the "Big Three." Developed by two University of Pennsylvania professors, this simple, three-question quiz tests a person's basic knowledge.
(If you're curious, take the Big Three quiz here. Hint: To pass, you simply need to know that compounding interest increases your money, that inflation decreases your spending power, and that a single stock is a riskier investment than a diversified mutual fund.)
According to the researchers, the people who got none of the three questions correct were also much more likely to say they plan to continue working past the typical retirement age —indicating that they are approaching this future phase of life in financial ignorance.
As one researcher put it mildly, "Many of those who say they will never retire may not know enough about their finances and are not working toward a financially successful retirement." Studies have found that a majority of people end up retiring sooner than they expected, including those who hoped they might keep working.2 Often layoffs, medical issues, and other life challenges intervene to cut a career short.
This is why it's important to have a plan for your retirement with some flexibility built in. We can help walk you through your unique plan for saving money now and living with confidence in retirement. Along the way, we’re happy to explain the why behind the strategy, so that you can make knowledgeable decisions about your future.
1. http://go.pardot.com/e/91522/news-2024-09-youll-html/964tt7/2589568506/h/YAuSbPTckU-ME27Qx3jdRolFUTyo3daeuVnR_wt1tTE
2. http://go.pardot.com/e/91522/reers-cut-short-194938202-html/964ttb/2589568506/h/YAuSbPTckU-ME27Qx3jdRolFUTyo3daeuVnR_wt1tTE
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