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A article in the NYTs says “Many people are not aware IRAs exist.” Can that be true? I bet it is.
One survey reports the median worker has only $955 saved for retirement. Another says 1 in 5 Americans over 50 has no retirement savings.Some people push for a national IRA with auto enrollment because people don’t have access at work.
I find that curious because as you know there are individual IRAs, ROTH IRAs, SEP IRAs (Simplified Employee Pension), Solo 401(k) and a Simple IRA. Of course there is the good old brokerage account and annuities too.
The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) highlights that financial literacy in the U.S. has hit a decade-low. U.S. adults correctly answered an average of just 47% of the basic personal finance questions on the index.
Some observers take this point of view. “The problem isn’t that Americans don’t care—in fact, surveys show a strong desire to learn—but rather that the financial landscape has grown increasingly complex while formal education has struggled to keep pace.”
Do you agree with that? Did you learn what you know about financial matters through formal education, or did you exercise initiative and educate yourself? Needless to say, all we need to know is readily available with reasonable effort and awareness. These days you don’t even have to do individual searches, you can have an AI tool do the initial work.
My 50 years of trying to educate workers about retirement, 401k, social security and health care coverage tells me it’s not lack of formal education (although I support that), it is absolutely a lack of caring about such issues, a lack of trying to be aware and an inability to focus on longer term issues and goals.
When was the last time you ignored something you truly cared about?
I began the private practice of medicine, and had never taken a course in business. From reading the masters including Jonathan, I learned the value of investing in businesses, via stocks. Many attributed Buffett’s success to the fact that he was a businessman who excelled at evaluating businesses and discerning their true long term value.
I suspect there are many who like myself, had neither interest, experience or education in business who suddenly found themselves in the curious position of needing to assume responsibility for planning their long term financial future. Ironically, now I had a desire to learn a bit about business! Of course people like myself, who lack Buffett’s expertise are fortunate to have low cost index funds and widely available information on how to invest successfully. Like that found on Humbler Dollar. Many may prefer for various reasons to hire an advisor, but they will still profit from learning about the topic to better understand and appreciate what the advisor is doing, and what it is exactly that they are paying for. I am a DIYer myself, but if my wife survives me, she will hire an advisor. Which is fine.
I can’t answer the question you posed, but my guess is the reasons are varied. Maybe for some, perhaps a combination of denial, confirmation bias, and wishful thinking?
Hard agree. Financial education is good, but not the solution.
Just Financially illiterate?
My sister told me if I would handle her investments she would come scrub my toilet for me. I guess she just wasn’t interested in it…
“It’s remarkable how much you have to learn to find out how little you need to know.” Jason Zweig
Excellent one liner!
I earned an undergraduate business degree and an MBA. I made many good decisions and some poor ones over the years. I think I learned 20% of what I know from school and the rest on the job. Personal finance is so complicated now that I don’t know how a regular person gets it right without expert assistance. As one of my professors once said, “the world is filled with promoters whose only goal is to separate you from your money”.
about saving for retirement, or for that matter saving for anything….yrs ago a client asked me to fly to rural kentucky and go to 2 non-union manufacturing sites to educate his employees about 401k plans and encourage them to contribute or contribute more. They already had a company pension and social security. I pulled the employee data and found that the average wage was barely above minimum wage. I told client that I would be happy to go there and bill him for the time but felt that with the wage levels, contributing more [or any at all] was a fantasy. The average employee simply had no money left after withholdings and basic necessities for savings. Never went to rural kentuky after all.
In this mortal life, no one ought to care more about your own health or money than you do yourself. If those two inextricably intertwined things are not true, then something is already broken. Good luck just the same.
The problem is Americans crave immediate, not delayed gratification, thus spending is more fun than saving.
Charlie Munger said, “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
It may be one of those questions for which “all of the above” is the answer .
Many people, for various reasons, are not good at making money.
Many people, for various reasons, including lack of ability, interest, or knowledge, are not good at handling or investing money. Financial issues intimidate many people.
And many people make poor decisions with their money. During my career, I often had to review employee personnel files, and I reviewed many files where an employee took an emergency loan from a 401(k) plan and then filed for bankruptcy not too long after the loan.
HD readers are a frugal, financially
conscientious group, but not as many of our fellow citizens share those traits as HD readers might expect or hope.
The schools may be helping more now than in the past. My grandson, for example, took a junior high class on college and career options this past school year. His teacher explained how wealth builds in a 401(k) account, in part, through compound interest, which was a revelatory concept for my grandson.
I learned from my parents who barely finished grade school but were reasonable and realistic.
Did you learn what you know about financial matters through formal education….
I surely didn’t, but I understand many school districts are now offering personal finance classes. I hope it becomes widespread, and that the lessons take hold.
Me neither. I just knew I wanted something different from my parents who were very affected by living through the depression and didn’t want anything to do with investments or banks.
I was lucky in that in my job I worked closely with experts in many financial related fields, from actuaries to financial advisors.