Last month, Fidelity released the results of its Retirement IQ Survey and uncovered a significant gap in knowledge among Americans who responded. According to Fidelity, although they only asked 8 questions, there was a lack of understanding among the majority of respondents for each inquiry. Take a look at what they asked:
- Roughly how much do investment professionals estimate people save by the time they retire? The correct response is “at least 10x the amount of one’s last full year’s income.” Nearly 75% of respondents got this wrong, underestimating how much they’d need to retire.
- How often over the past 35 years do you think the market has had a positive annual return? Only 8% of respondents got this one right, nailing the fact that the market has enjoyed a positive annual return 30 out of the past 35 years.
- If you were able to set aside $50 each month for retirement, how much could that end up becoming 25 years from now, including interest if it grew at the historical stock market average? The correct answer is roughly $40,000, and only 16% got that answer right. Nearly half of respondents underestimated the impact of small savings compounding over time.
- Given the current average life expectancy, if you want to retire at age 65, about how long would you need your retirement savings to last? Based on current life expectancy (85 for males, 87 for females), the answer is approximately 22 years. Only 33% of respondents got this one right.
- Approximately how much did the average monthly Social Security benefit pay in 2016? The answer is about $1300, and only 43% of respondents got this correct.
How are you faring on this quiz? Fidelity asks an additional 3 questions, none of which saw the accurate response rate break the 50% mark. Needless to say, the majority of Americans seem to misunderstand the needs surrounding retirement planning. How did you fare on these questions? Do the results surprise you?
At McCabe & Associates, our job is to make sure your Retirement IQ is above average, and that you have a thorough understanding of all these concepts. If you’d like to discuss your retirement plan with us, just contact our office. We’d love to help you. To read the full results of Fidelity’s Retirement IQ survey, go to https://www.fidelity.com/about-fidelity/individual-investing/how-much-do-you-know-about-retirement.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
