'Longevity literacy' may be key to better retirement readiness
New calculation in the annual Personal Finance (P-Fin) Index shows women have more accurate understanding of longevity than men
NEW YORK, Jan. 12, 2023 /PRNewswire/ -- More than one-half of American adults lack a basic understanding of how long people tend to live in retirement, a knowledge gap that can keep them from saving enough money to last as long as they live.
That finding on low rates of "longevity literacy" comes from the Personal Finance (P-Fin) Index, an annual survey of more than 3,500 people nationwide by the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington (GW) University School of Business that serves as a barometer of financial awareness. This is the first time the P-Fin Index assessed whether people also understand longevity, and the results revealed a major challenge to retirement planning and investing.
The P-Fin Index asked respondents about the life expectancy of Americans who are 60. All told, only 37% of those surveyed knew the correct answer. More than half (53%) either said they didn't know or underestimated how long they'd live.
"Longevity literacy is an overlooked factor in addressing retirement preparedness," said Surya Kolluri, head of the TIAA Institute. "If you don't have a realistic understanding of how long you are likely going to live, you are missing one of the most foundational components of any plan: a time horizon. If we can improve people's longevity literacy, we can help create better retirement plans and increase their confidence."
This year's P-Fin Index research shows confidence is an attribute that most people lack: Only 40% of Americans still in the workforce think their retirement savings are on track.
One of the most striking findings is that 43% of the women polled demonstrated strong longevity literacy, compared to only 32% of men. That's a sharp contrast to financial literacy levels, where men consistently rank higher.
A possible explanation of the difference could be that men have traditionally spearheaded their families' financial decisions, including how they will save for retirement, so they often have more financial literacy. But women have traditionally been more influential in healthcare decisions, which helps their longevity literacy.
"This research shows that if we want to create better retirement outcomes, we need to start by making sure people understand how long they are going to live in retirement," said Annamaria Lusardi, University Professor at GW and GFLEC's Academic Director. "Along with making it easier for people to access quality retirement plans and save appropriately, raising the rate of longevity literacy is a clear and urgent need for our country."
The survey polled both people still in the workforce and retirees. Consider what was shared from the retirees with strong longevity literacy:
- 81% saved for retirement while they were working, compared to 57% of those with poor longevity literacy.
- 54% have tried calculating the overall amount they need to save, compared to 30% of those with poor literacy.
- 40% find it very easy to make ends meet – almost twice as many as those with poor literacy (23%).
- 40% are very confident about having enough money to live comfortably throughout retirement, compared to 25% of those with poor literacy.
- Only 17% said they have a lifestyle that falls short of their pre-retirement expectations. For those with poor literacy, more than twice as many (37%) agreed.
TIAA Institute and GFLEC will share more insights from the P-Fin Index and discuss the relevance of longevity literacy in a #ConnectingToReimagine webinar on January 17, 2023, at 11:00 a.m. ET. Click here to register for the virtual event.
About the TIAA Institute
The TIAA Institute helps advance the ways individuals and institutions plan for financial security and organizational effectiveness. The institute conducts in-depth research, provides access to a network of thought leaders, and enables those it serves to anticipate trends, plan future strategies and maximize opportunities for success. For more information about the TIAA Institute, visit www.tiaainstitute.org.
About TIAA
TIAA is a leading provider of secure retirements and outcome-focused investment solutions to millions of people and thousands of institutions. It is the #1 not-for-profit retirement market provider1, paid more than $6.4 billion in lifetime income to retired clients in 2021 and has $1.2 trillion in assets under management (as of 9/30/2022)2.
About GFLEC
The Global Financial Literacy Excellence Center (GFLEC) is dedicated to advancing research and solutions that open the door to universal financial literacy. In working toward that mission, GFLEC has positioned itself as the world's leading incubator for financial literacy research, policy, and solutions. GFLEC launched in 2011 at the George Washington University School of Business in Washington, D.C. Since then, it has pioneered breakthrough tools to measure financial literacy, developed and advised on educational programs, and crafted policy guidelines aimed at advancing financial knowledge in the United States and around the world. For more information on GFLEC, visit www.gflec.org/.
- As of July 21, 2022. Based on data in PLANSPONSOR's 403(b) 2022 DC Recordkeeping Survey, combined 457 and 403(b) data.
- As of September 30, 2022 assets under management across Nuveen Investments affiliates and TIAA investment management teams are $1,179 billion.
SOURCE TIAA Institute
Share this article