Financial literacy among Americans is more important now than it ever has been because retirement savings has moved away from defined benefit plans, where people expected to get a set amount when they retired, to defined-contribution plans, where they are asked to make decisions about how they want to invest their money.

"To navigate the path toward a comfortable retirement requires sound knowledge of financial basics and the existing investment choices, as well as the ability to understand and cope with the ever-changing set of financial instruments," according to a new report by the Employee Benefit Research Institute that looks at the difference between financial behavior and financial literacy.

People with higher levels of financial literacy tend to approach retirement with much higher levels of wealth, according to the report. It also found that the majority of Americans have limited financial knowledge about basic concepts like inflation, compound interest, risk diversification and numeracy skills.