Latest news with #AmericanCollegeofFinancialServices
USA Today
2 days ago
- Business
- USA Today
Can you pass this quiz on Social Security, savings and debt? Most Americans could not.
Can you pass this quiz on Social Security, savings and debt? Most Americans could not. Show Caption Hide Caption How are tariffs and your 401(k) retirement savings intertwined? Experts say a rise in tariffs can lead to several factors that impact your retirement savings. If you think you are financially literate, then try to answer this question: How much of your healthcare expenses do Medicare and other government programs cover in retirement? Over 90%? About two-thirds? Or about half? If you chose 'about two-thirds,' you're correct, and you're in the minority. Only about one in four Americans answered that question right on a financial literacy quiz, completed online in January by 3,371 consumers. Overall, Americans got correct answers on just under half of the quiz questions. The findings come from the 2025 Personal Finance Index, published in late May by the TIAA Institute and the Global Financial Literacy Excellence Center. Each of the 28 questions covers a basic concept of financial literacy: Saving and investing, borrowing and managing debt, spending money and comprehending financial risk. Most Americans don't pass this financial literacy quiz In a financially literate society, the quizmasters say, most of us would know most of the answers. Yet, only 16% of quiz-takers got 22 or more of the 28 questions right. The average test-taker knew about half of the answers. 'In a capitalist economy, when human beings are responsible for managing their own finances, including their own lifestyle in retirement, a certain amount of financial knowledge is assumed,' said Michael Finke, professor of wealth management at the American College of Financial Services. 'And people who don't have financial knowledge are vulnerable.' The Personal Finance Index and attendant quiz have been offered annually since 2017. The results suggest that Americans aren't making much progress in financial literacy. In the best year, 2020, quiz-takers answered 52% of the questions correctly. The results matter 'because the lack of financial awareness is what holds people back from either building wealth or getting out of a cycle of debt,' said Caleb Silver, editor in chief of Investopedia, the financial journalism site. Financial literacy runs low, according to Silver and others, because most Americans don't learn much in school about saving, investing or managing debt. The next generation may do better. More than two-thirds of states now require personal finance classes for high school graduation, compared with fewer than half of states in 2022, according to the Council for Economic Education. Financial literacy: We know a lot about debt . . . The Personal Finance Index quiz measures literacy in eight subjects. The share of correct answers in 2025 ranged from a high of 59%, on the subject of borrowing, to a low of 36%, in the area of comprehending risk. Test-takers showed greater knowledge on the basics of saving, and less literacy on insurance and investing. If you don't understand the basics of managing debt, then you might not know that a credit card balance with a 20% interest rate costs the borrower more over time than a balance with a 10% rate. If you aren't financially literate on investing, then you might not appreciate the power of compound interest in building retirement savings over multiple decades. 'How much of your paycheck to save for retirement: This is an incredibly important decision that can have a huge impact on the standard of living that you have in retirement,' Finke said. . . . And not a lot about risk Nothing flummoxed the quiz-takers more than risk, a set of questions that covered uncertain financial outcomes. Here is a sample question about risk: There's a 50/50 chance that Malik's car will need engine repairs within the next six months, which would cost $600. At the same time, there is a 10% chance that he will need to replace the air conditioning unit in his house, which would cost $4,000. Which poses the greater financial risk for Malik? The air conditioning replacement? The car repair? Or is there no way to tell? To get the correct answer, you multiply the cost of each scenario by its probability. As it turns out, the A/C replacement poses the greater risk. One-third of quiz-takers figured that out. 'It's a very simple scenario, but there's a lot going on there,' said Surya Kolluri, head of the nonprofit TIAA Institute. Test your knowledge on these financial literacy questions Here are some other questions from the Personal Finance Index quiz. Test your financial literacy! Latisha plans to start saving for retirement by setting aside $2,000 this year. Her employer offers a 401(k) plan and fully matches a worker's contributions up to $5,000 each year. Under which scenario does Latisha have the largest amount in retirement savings at year-end? A) She contributes $2,000 to the 401(k) plan and invests the money in a mutual fund that earns a 5% return during the year. B) She contributes $2,000 to an IRA, or Individual Retirement Account, and invests the money in a mutual fund that earns a 5% return. C) It doesn't matter: She will have the same amount of year-end savings either way. Answer: A. Anna saves $500 each year for 10 years and then stops saving additional money. At the same time, Charlie saves nothing for 10 years but then receives a $5,000 gift, which he decides to save. If both Anna and Charlie earn a 5% return each year, who will have more savings after 20 years? A) Anna B) Charlie C) Anna and Charlie will have the same amount Answer: A. Which statement about Social Security is false? A) The amount someone receives in Social Security benefits depends upon his/her earnings during the last two years of full-time employment. B) A worker receives Social Security benefit payments if he/she becomes disabled before retiring. C) Social Security benefit payments will continue as long as an individual is alive, no matter how long he/she lives. Answer: A.
NDTV
14-05-2025
- Business
- NDTV
Majority Of Americans Fear Financial Insecurity In Retirement More Than Death, Study Finds
Amid rising inflation, tax pressures, and uncertainty over Social Security benefits, most Americans fear financial ruin in retirement more than they fear death. As they grapple with the realities of longer life expectancies, a growing number say they would rather not live to 100. According to a new study by the Nationwide Retirement Institute and the American College of Financial Services, only 29% of US adults wish to reach the century mark. The primary reasons behind this reluctance are fears of financial insecurity and declining health in old age. Alarmingly, nearly three out of four Americans worry they'll outlive their savings, the survey revealed. According to a news release, the research, which explores the financial implications and consumer sentiment related to rising life expectancy, highlights just how fragile the equation can be. According to the college's research, extending a retirement by just 5 years from 30 to 35 years increases the risk of depleting savings by a striking 41%, based on historical market returns. And that risk only intensifies as lifespans continue to lengthen, particularly among healthy, higher-income retirees. A companion consumer survey from the Nationwide Retirement Institute shows most Americans are underestimating both their chances of living to 100 and the financial demands that kind of longevity brings. In fact, only 29% of respondents said they want to live that long, citing concerns about declining health and deep financial anxieties. Roughly three in four fear they'll run out of money before they run out of time. Today's volatile economic environment is raising the stakes even higher. According to the joint research, two out of five non-retired Americans (40%) now say they plan to delay retirement due to inflation. And the math is sobering when factoring in lower projected 10-year portfolio returns: Extending retirement by just five years increases the risk of running out of money by more than 300% according to the college's analysis. These findings send a clear message - retirement planning needs a major reset. Both consumers and advisors must shift their mindset, prioritising longevity risk and placing a stronger emphasis on guaranteed income strategies that can weather uncertainty. "Too many people underestimate how long they'll live - and that blind spot can seriously undermine their financial security," said Michael Finke, PhD, CFP, professor of wealth management, director of the Granum Centre for Financial Security at The American College of Financial Services and co-author of the study. "We consistently see that those who plan for longevity feel more confident about retirement. The key drivers of that confidence? Working with an advisor, having access to guaranteed income, and building a plan that's designed to last."
Newsweek
13-05-2025
- Health
- Newsweek
Most Americans Say They Hope They Die Before 100 as Retirement Costs Surge
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. As Americans confront the realities of longer life expectancies, a growing share would prefer not to see their 100th birthday. A new study from the Nationwide Retirement Institute and the American College of Financial Services finds that only 29 percent of U.S. adults want to live to 100, with most citing fears about financial instability and deteriorating health in old age. Among the top concerns: nearly three in four Americans fear they'll run out of money before they run out of time, according to the Nationwide Retirement Institute survey. Why It Matters The U.S. Census Bureau projects the number of centenarians will quadruple by 2054, raising urgent questions about how people will finance decades of retirement. Yet most Americans are not planning for such longevity. Only 48 percent factor lifespan into their retirement decisions, while just 26 percent accurately estimate life expectancy for a 65-year-old man, ThinkAdvisor reported in a May 2025 analysis. The lack of proper planning could leave millions exposed to financial difficulties late in life. A sign with "DNR and DNI: Do Not Resuscitate and Do Not Intubate" is posted on a Coronavirus patient's bed in the extension of the Intensive Care Unit of the Serious Infectious Disease Unit in... A sign with "DNR and DNI: Do Not Resuscitate and Do Not Intubate" is posted on a Coronavirus patient's bed in the extension of the Intensive Care Unit of the Serious Infectious Disease Unit in Edinburg, Texas, July 8, 2020. MoreReportage What To Know While only 29 percent of U.S. adults say they want to live to 100, according to the Nationwide Retirement Institute and the American College of Financial Services report, 59 percent of the 1,000 consumers surveyed still said that making it to 100 was a "blessing." However, that number dropped to 55 percent among workers aged 55 to 65, and 45 percent said a lifespan reaching 100 was a "burden." A joint study highlighted in Kiplinger explored the chances of financial shortfalls the older someone gets, noting that extending retirement by just five years—from 30 to 35 years—increases the risk of outliving savings by 41 percent using historical market returns. That risk climbs to over 300 percent with lower expected returns over the next decade. Despite the financial risks, the uptake of solutions like annuities and long-term care insurance remains low. While 32 percent of Americans believe long-term care coverage would be helpful for living to 100, only one in 10 actually own such a policy. Similarly, 31 percent say lifetime-guaranteed income would improve their financial outlook, but few invest in annuities, according to Kiplinger. High inflation and surging home insurance premiums add strain for some retirement plans. For baby boomers retiring now, fixed incomes may not be enough to absorb rising living costs, including housing-related expenses that have increased substantially in recent years, as HousingWire reports. What People Are Saying Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "I don't believe it is as much about the cost of living, but about the quality of life. So many of us have seen our parents die slowly whether it be through dementia or just illness. Many Americans, if guaranteed a healthy existence, would choose to live longer." Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: "In planning for retirement, we should view longevity as the number one risk multiplier—every risk we face in retirement is exacerbated by living longer. Living just 5 extra years can triple your chances of running out of money in retirement, and that's a scary thought. Modern medicine is very good at extending our lives, but not necessarily improving the quality of our lives, especially in old age." Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "As morbid of a topic as it is, more Americans than ever before are concerned about being able to financially support themselves with longer lifespans. Some baby boomers and those in Gen X are already encountering issues due to the higher cost of living and are coming to the realization retirement may have to be delayed. Those in younger generations are already feeling pricing pressure and are having to delay major life events and purchases because of it." Michael Ryan, a finance expert and the founder of told Newsweek: "Living to 100 looks great on a birthday cake, terrible on a financial statement. Why do only 29 percent of Americans want to hit the century mark? Because they've done the math. A 38-year retirement at $60k a year needs $2.3 million saved. Yet the average American has just $88,400 squirreled away. That's not a gap; it's a canyon." What Happens Next To adapt to the prospect of living to 100, financial advisers and institutions are urging a shift in mindset. Innovations allowing workplace retirement plans to include guaranteed income solutions are gaining traction. But experts warn that unless Americans start planning for longer lives now—incorporating realistic longevity assumptions, controlling debt, and boosting retirement savings—the growing population of centenarians may be financially worse off than ever. "As centenarians become more common, their children and grandchildren are witnessing first-hand the money and health difficulties of living that long and concluding they themselves may be better off passing away just a bit earlier," Powers said. "Social Security is already stressed. What will happen when the average beneficiary collects for 25 to 30 years versus today's 18- to 22-year average?" Policy discussions are also intensifying, particularly around Social Security sustainability and incentivizing private long-term care insurance coverage. For many Americans, the challenge lies not in reaching 100 but in surviving it financially. "This will put additional strain on the social security system as we have seen currently," Thompson said. "As more people age and live longer, there will need to be more people to fill the bucket. We are already seeing the stressors within the system, and just adding more will cause fractures."
New York Times
04-04-2025
- Business
- New York Times
How to Protect Your Retirement Savings Now as Markets Plunge
'Stay the course.' 'Tune out the noise.' 'Focus on the long term.' That's the advice that experts typically play on repeat at times like these, when stock prices are volatile or falling — as they did Thursday, when the S&P 500 dropped nearly 5 percent, its worst decline since the pandemic in 2020. It is wise counsel for most people, since no one knows for sure which way the market or the economy will end up this year, and missing out on stock gains, even briefly, can put a big dent in your retirement savings. What's more, over periods of 10 to 20 years or more, stocks have always bounced back handily after downturns, leaving investors who remained steadfast with far bigger balances than they had before the turmoil. But what if you don't have a decade or more to wait out a recovery? For anyone who intends to leave the work force in the next few years or who has recently retired, the current financial environment is perilous. If you're still working, a recession could push you out of a job earlier than planned, cutting short the time you have left to save and extending the period you need those savings to last. And for both near and recent retirees, a big drop in stock prices increases the risk you'll eventually run out of savings. 'What happens to the market and the economy in those near and early retirement years matters disproportionately to the success of your entire retirement plan,' said Wade Pfau, a professor at the American College of Financial Services and author of 'Retirement Planning Guidebook.' That's why financial experts often refer to this period — roughly the five years before or after you stop working — as the retirement danger zone, and urge people in it to be proactive about reducing their risks. Here are five steps they recommend taking now. Build a Cash Cushion When stock prices drop just as you start withdrawing funds to cover expenses, you have to sell more shares to meet the same spending needs. That leaves less money to grow back once the market recovers. 'It can dig a hole where your retirement account just can't catch up anymore,' Dr. Pfau said. Consider two new retirees with $1 million in savings. Both start withdrawing 4 percent a year (and then adjust for inflation) to help cover their bills during retirement, and while gains and losses vary from year to year, both on average earn 5 percent annually on their investments. The only difference: Retiree A has her best year, a 20 percent gain, in Year 1, while Retiree B has his worst year, a 20 percent loss, at the start. The upshot? After 30 years, Retiree A has more money than when she started, a cool $1.6 million, according to an analysis by J.P. Morgan Asset Management. Retiree B, with far fewer dollars available to grow over time, runs out of money after about 22 years. To avoid Retiree B's fate, financial advisers suggest moving enough money into stable cash investments such as money market funds and short-term Treasury securities to cover how much you'll need to pull from savings in the first two to three years of retirement. Since you can't predict the best time to sell, gradually shift the amount you'll need from stocks to cash in equal installments over the next several months, advised Mark Whitaker, founder of Retirement Advice, a financial planning firm in Provo, Utah. It's also a good idea to identify other sources of income you could tap if needed, such as annuities, a home equity line of credit or even a reverse mortgage if you have substantial equity in your house. An added benefit to this strategy: 'It helps people disconnect emotionally from what is happening with the market,' Mr. Whitaker said. 'It's like, OK, the money I need to live on initially is protected and my retirement plan is not contingent on what the S&P does this year.' Fix Your Mix (a Little) You can also dampen the risk of losses in your retirement account by shifting more of your assets into bonds, which historically have lost far less money than stocks during downturns. That's especially important if you haven't rebalanced your investment mix after the sharp gains of 2023 and 2024, when the S&P 500 rose 26 percent and 25 percent. You might aim to have enough money in bonds and cash to cover how much you need to withdraw from investments for five to seven years in retirement, suggested financial planner Clint Haynes, a retirement transition specialist in Lee's Summit, Mo., and author of the book 'Retirement the Right Way.' Don't go overboard, though, he cautioned. You still need to keep a substantial percentage of savings in stocks — perhaps 50 to 70 percent — to combat the other big financial risk for retirees: inflation. Over time, only stocks have been able to handily outpace rising consumer prices, increasing an average 10 percent a year historically, which is more than double the gains of bonds and real estate and triple the return on cash investments. 'Inflation is a low drip, like boiling a frog: The impact kind of creeps up on you, but when it hits, it doesn't feel good,' Mr. Haynes said. Don't fool yourself into thinking you can bail out of stocks now, then jump back in when the market stabilizes. Gains historically have come in unpredictable spurts, and the biggest advances often come within days of the worst declines. If you missed the 10 best days over the 20 years from 2005 to 2024, you would have reduced your returns by more than 40 percent, according to J.P. Morgan; if you missed 30 of the best days out of the roughly 5,000 trading days during that period, you'd have lost money, after inflation. Adjust Your Spending Reducing your spending, even temporarily, will also help your money last. If you're still working, every dollar you don't spend is one you can direct toward saving, to be better prepared if a recession or bear market hits. And if you're already retired, every dollar you don't spend is one dollar fewer you need to pull from savings when stock prices may be down. Look at your discretionary spending and see where you can make a few strategic cuts. 'If you budgeted $5,000 or $10,000 for travel, maybe this isn't the time for a big trip, or if you're gifting to the kids or grandchildren, pull back a bit,' said Lazetta Rainey Braxton, a financial planner and founder of the Real Wealth Coterie in New Haven, Conn. Or take a more systematic approach. Instead of following the standard guidance to keep withdrawals to 4 percent of the balance in your retirement account, then adjust annually for inflation, you might forgo the inflation raise when stock prices are falling, Dr. Pfau said. Or you can install so-called guardrails, limiting withdrawals to, say, 3 percent in bad years for stocks but taking out, perhaps, 5 percent when the market is surging. Have a Plan B — and C Taking action and being flexible in response to economic conditions can also help with the emotional toll of worrying about your money in the early years of retirement, said Teresa Amabile, a psychologist and professor emerita at the Harvard Business School and co-author of the book 'Retiring: Creating a Life That Works for You.' 'Facing these uncertain markets and an uncertain economy, you can't help but feel some anxiety, but our research found that exercising agency in making changes and practicing adaptability to unforeseen circumstances can help allay those concerns,' Dr. Amabile said. One helpful exercise, Dr. Amabile said: Think through three different options for your lifestyle in retirement — your ideal, a scaled-down version that might be more realistic financially and an even less costly option if economic conditions leave you feeling squeezed. Maybe, for instance, you hoped to buy a second home in a warm location to escape to during the winter months. A scaled-back version might be renting a beach house instead for a month or two during the cold weather; a third version might be taking a shorter winter vacation or even downsizing to a smaller home to free up cash for travel. 'Plan scenarios that are all appealing,' Dr. Amabile said. 'Realizing that you have a variety of enjoyable options is what's key.' Work a Little Longer If you're still working, putting off your exit date for a while will give you more time to save and shorten the number of years those savings have to last. 'Working longer is a really powerful way to improve your retirement finances and get a spending plan back on track,' Dr. Pfau said. Already retired? You may still be able to postpone withdrawals from your savings, or at least take less money out, by finding a part-time job to supplement income from pensions or Social Security. Of course, continuing to work isn't an option if, for instance, you're retiring because of health problems or you were laid off and can't find another job. Or you may simply be reluctant to change your schedule for a retirement you've worked and planned hard over decades to enjoy. 'Time is a currency, too, and it's important to think about all of the trade-offs,' Ms. Braxton said. 'Are you willing to give up on the things you wanted to do in your robust years without the pressure of an alarm clock? Because you never know what can happen, especially with your health.' Rather than continuing to work, you might consider downsizing or cutting expenses more than you planned because the trade-off is worth it to you, Ms. Braxton said. 'The clearer you are about your vision for the life you want in retirement, and the reality of the financial options, the better your chances of getting to a place where it all works out.'
