FREE NEWSLETTER
Go to main Forum page »
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 remember that in @ 1983-84, I was giving a presentation to a group of new employees about the benefits of participating in the company 401 (k) plan. The level of ignorance was almost as bad as the level of interest. Apparently, getting free money with a 100% guaranteed return was too hard for some people to grasp.
Since that time, I have never been surprised by the financial illiteracy of my fellow Americans. I also suspect that the ignorance is not accidental. After all, 99% of graduating high school students fail the simplest personal finance quiz… and 65%-75% of adults over 50 do not do much better. It’s almost like our government and financial institutions prefer an ignorant, financially illiterate population.
My stepfather discovered mutual funds in the late 1950s. He retired in 1985, after 24 years in the US Army and 16 years as a Capital Police officer. He began investing in his late 20s. Over 40 years, he amassed $1.3 M and had a paid-for home and car. And he did it without a 401 (k) or Roth Account.
I retired in 2024 with $1.3M, a paid-for home, and 2 cars. As I shared in a recent post, over my lifetime, I earned @$4,233,495. 59.95% of that money was earned in the last 15 years of my 58-year working career. During those 15 years, I earned my highest annual income and maxed out my 403 (b) and Roth IRA.
It’s never too late to start, but the earlier the better!
I learned how NOT to invest from my parents. I have absolutely no formal education, never took any kind of financial classes, but I’m a do it yourselfer when it comes to most things, including investing. I purposely keep it simple and boring. I was a Teamster, blue collar guy, but we managed to raise 3 kids, 2 with Master’s degrees with little college debt and accumulate a 7 figure portfolio thru years of modest saving and investing, index funds only thru Vanguard. If I can do it, anyone can.
Mike, I love to read about success stories like yours. The readers that have been on HD for a while know that I drove a beer truck for 30 years. Like you, I got to where I wanted to be financially.
I didn’t graduate from college, but I did make it through high school. By the clear and articulate way that you express yourself, I’d never guess that you didn’t receive any formal education.
As Henry Ford is credited with saying. If you think you can or think you can’t, you’re right. You found out you could and you did.
You’re right, virtually anyone can. I started with a high school education and a near minimum wage union job and very gradually got to where I wanted to be, including paying for 16 years of college for four children and earning a degree over nine years at night.
It is not education that matters it’s determination and setting priorities and sticking with both – and likely delaying some things you may want.
Of course, the absence of serious misfortune helps as well.
Did Henry Ford’s words apply to all people or only to people of certain backgrounds?
In this man’s opinion, it applies to all people… albeit it can certainly manifest in different ways.
One thing is for sure: those who do not try, do not succeed.
I was 8 y/o in the 1950s when my father was taking his MBA at Syracuse U. I was asking him numerous things financial, one of which was, “How do you get rich?” His answer, “Two ways, real estate and/or stock market investing.” Never forgot the latter.
My parents continually modeled financial discipline and deliberation, so adopting their behaviors came easily. But I didn’t start thinking seriously about investments until my 30s. Then, the most useful resources were the print magazines I received each quarter from TIAA. They helped me to see investing as a journey, and to envision a future self. Easier, I think, to read and reflect on a printed page than to click on a soon forgotten article, HumbleDollar excepted.
All you need to know about investing is index investing. Read first A RANDOM WALK DOWN WALL STREET TO LEARN why its the superior way to invest and then another book by bogle on funds or Wm Bernstein’s book The 4 Pillars of Investing. That’s all you need to know to invest better than the rest that are financially illiterate
I’m about 65 YOA, have an MBA, and yet, until about 2 or so years ago, did not really understand how the Fed creates money, injects it into the financial system, growing the money supply. In other words, how money flows through the system. They don’t teach that in grad school. They also never mentioned the Cantillon Effect, by which those closest to the money spigot get first dibs on the money flowing into the system and thus benefit to a much greater extent than wage earners. Think banks, hedge funds, private credit, private equity, large corporations, etc. The trickle down effect is highly overrated. And so we end up with this “K” shaped economy whereby those owning assets benefit at a much greater extent than wage earners trying to survive. There are certain aspects of our financial system you simply have to learn on your own.
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 Humble 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.”
Ahh…the deferred gratification gene. A great gene to have. I wonder if our iPhones and how we live today is causing trouble for that gene.
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.