Financial literacy is interconnected with the ability to properly plan for retirement, and therein lies the rub, suggests research from the George Washington University School of Business.
Annamaria Lusardi, a professor of economics and accountancy at GWU, spoke Wednesday in Washington D.C. as part of National Retirement Planning Week, and says financial literacy is lowerst among younger adults, the elderly and especially among women.
Those with a higher level of financial understanding tend to take an active role in their retirement planning and enlist the help of a financial planner, she said; Approximately 60 percent of Americans have made no effort whatsoever to try to figure out the amount of money they'll need for retirement, unfortunately.
At the same time, American employers' move away from traditional pensions to the more complicated and choice-sensitive world of defined contribution plans necessitates more education on the part of the working public.
Workers need to be better equipped with the tools to understand how to use tools including (but not limited) to their company 401(k) plans, and how to turn those savings into lifetime income.
Making the switch from accumulation to decumulation is also an issue, according to speaker Mark Schwartz, senior executive VP of AXA Advisors' Washington D.C. office.
"People spend more time planning their annual vacations than they do planning their own retirement," he said.
Schwartz suggested that financial education be launched as a concept with children in primary school, which might help better prepare them for adult finanical challenges.
A new study released by FINRA's Investor Education Foundation also found that women with low levels of financial literacy were prone to costly decisions such as incurring late fees on their credit cards.