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Financial Literacy

Author: Helen Dennis, Specialist on Aging

Dear readers.  Regardless of age, it’s hard not to think about money with our current economy.

I do not write about managing finances.  That’s best left to the financial experts.  What I can share with you are some trends and information relevant to financial literacy – “the ability to use knowledge and skills to manage one’s financial resources effectively for a lifetime of financial security,” a definition use by the President’s Financial Literacy Council.

In January 2001, the Employee Benefits Research Institute conducted their annual Retirement Confidence Survey.  The report had the following headline:  “Confidence Drops to Record Lows, Reflecting the ‘New Normal.’”

Confidence. The Institute found that over one in four (27 percent) workers is not at all confident about having enough money for a comfortable retirement.  That’s an increase from 22 percent in 2010.  Rather than making basic adjustments to spending and savings, workers are changing their expectations about living a “new normal” in retirement.

Savings. The report indicates that 68 percent of workers and/or their spouses saved for retirement, a decrease from the 75 percent who reported saving in 2009.  What is alarming is the sizable percentage of workers who have no savings or investments:  29 percent say they have saved less than $1,000.

Retirement age. The expected retirement age continues to rise and has increased over time.    The survey indicated that only 23 percent of workers expect to retire before 65 compared to half of the workers in 1991.  The poor economy (36 percent), lack of faith in Social Security or the government (16 percent) and a change in employment (15 percent) were the most frequently stated reasons.

Here is a little quiz consisting of are six (out of 15) questions from the 2011 MetLife Retirement Income IQ report, a survey of pre-retiree knowledge of financial retirement issues.

  1. “What is the greatest financial risk facing retirees?”  (a) inflation, (b) longevity, (c) investments, (d) interest rates.
  2. “What is the percent of pre-retirement income needed for a comparable lifestyle in retirement?”  (a) 20-30% (b) 40-50%, (c) 80-90%, (d) 90-100%.
  3. “At what age would a person who is 55 in 2011 be able to collect full Social Security benefits?”  (a) 59 ½, (b) 65, (c) 66 and 4 months, (d) 65.
  4. “How much more will a person’s monthly benefits be if they delay their Social Security benefits from age 66 to 69?” (a) 0%, (b) 3%, (c), 15%, (d) 24%.
  5. “What is the average annual cost for a private room in a nursing home?”  (a) $44,000, (b) $63,000, (c) $72,000, (d) $84,000.
  6. How much do people age 65 and older spend annually on out-of-pocket costs for health care?”  (a) $1,190, (B) $2,200, (c) $4,900, (d) $6900.

Answers: Next to each answer is the percent of MetLife respondents who gave the correct answer.

  1. (b) longevity;  63% got this correct
  2. (c) 80-90%; 45% got this correct.
  3. (c) 66 and 4 months; 25% got this correct.
  4. (d) 24%; 17% got this correct.
  5. (d) $84,000; 28% got this correct.
  6. (e) $4,900; 40% got this correct.

The survey revealed that although many of the 15 questions were answered correctly, there was “persistent areas of misperception and misunderstanding.”  The answer is “not just more education, but the right education”, according to the report.

We have resources in the South bay.  For classes on financial planning for long term care and Medi-Cal for nursing home care go to or call 310-533-1996.  Torrance Memorial Medical Center offers a series of free classes on financial planning taught by a volunteer group of attorneys, CPA’s and financial and estate planners.  Call 310-517-4728 for more information.

Comedian Jackie Mason was content with his finances.  He is quoted as saying, “Right now I have enough money to last me the rest of my life – unless I buy something.” On a more serious vain Einstein reminds us that “Many of the things you can count — don’t count. (And) many of the things you can’t count– really count.”

I hope this column serves as a bit of encouragement for all of us to upgrade our knowledge and skills in managing our financial resources for that lifetime of financial security.

Copyright 2011 Helen Dennis. All rights reserved.

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