One’s golden years should be rife with well, gold, but seniors can be ill-equipped to tackle their personal finances if they lack financial literacy.
According to a new FINRA study, lower financial literacy among seniors adds up to poorer decision-making, higher vulnerability to scams and lower psychological well-being.
“I find that roughly 45% of people in retirement lack financial literacy,” said Peyton Leonard, a finance expert with EffortlessInsurance.com. “A lot of times, they lack financial literacy because they are no longer in the workforce. They become comfortable in their retirement and forget the skills they used to have.”
Leonard likens the phenomenon to kids going into the summer break after the school year.
“All that they learned the previous year goes out the window,” Leonard said. “When they come back to school in the fall, there’s always a lot that has to be retaught.
They Didn’t Grow Up in the Information Age
Another reason that retirees may find themselves lacking in financial literacy is because they didn’t have the privilege of growing up with the endless digital scroll of information: the internet. Furthermore, retirement planning wasn’t always the hot topic it is today when we’re facing a crisis around under-saving.
“The retirees of today did not grow up in the information age,” said Terry Sacka, founder and chief strategist of Cornerstone Asset. “Knowledge of and access to financial information regarding retirement accounts, their benefits and what investments even qualify to go in them was under emphasized and often neglected during their time.”
The Need for Financial Literacy Intensifies in Retirement
If you’re already retired, you may be thinking, “Why even bother catching up on financial literacy now?” That’s a valid feeling, especially with so much media coverage revolving around the importance to plan and save leading up to retirement. But no matter your age, financial literacy is still important, and it’s never too late to learn; in fact, retirement is one of the most crucial times to dig into money management topics.
“Financial literacy is important throughout each phase of one’s financial life, most especially in retirement as there are no ‘redos’ or going back,” said Michele Lee Fine, RICP, founder and CEO of Cornerstone Wealth Advisory. “You have a finite amount that you have saved, so it’s critical to be informed and aware on how to best protect what you have worked hard to save and make it last as long as possible.”
There’s also the chance that you could outlive your savings.
“Financial literacy is very very important in retirement, as there is a significant risk that an individual will outlive their retirement savings during their lifetime,” said Jovan Johnson, a certified financial planner, CPA and CEO/owner of Piece of Wealth Planning LLC. “Humans are living much longer, but are not planning for it. Also, many retirees don’t consider the large medical expenses that come up during retirement. There is a misconception that during your retirement years, you will spend significantly less. This is not necessarily true, as your spending will decrease in some areas while increasing in others.”
Read More: How Much Do I Need To Retire?
Available Free and Low-Cost Resources
Fortunately, those in retirement have an abundance of free or low-cost resources available to them to help them navigate their financial lives.
-Talk with your retirement broker and/or financial advisor. “Your first port of call should be to talk with your retirement broker or financial advisor,” said Tony Martins, founder at Profitable Venture. “They will have the best picture of your financial situation and should be able to guide you to make the right decisions with your money.”
-Schedule a consultation with an RICP. “There are financial experts trained specifically in retirement planning such as those with the Retirement Income Certified Professional (RICP) designation that can help guide you with the right questions to ask, the important things to consider and be a resource to you leading up to and throughout retirement so you can make informed decisions,” said Fine.
-Check Out AARP’s Local Offerings. AARP isn’t just a card you get when turning a certain age, ahem, it’s a veritable passport to retirement resources. “AARP US Virgin Islands hosts monthly financial literacy classes,” said Amy Rose Herrick, ChFC, America’s Profit Building Specialist. “They are open to the public aged 18-plus in addition to members of AARP in the U.S. Virgin Islands. Pre-registration is required for these free informative Zoom presentations you can attend from anywhere. We leave time for Q&A and attendees receive, by email, copies of the presentation and any other handouts following the event from the sponsor for future reference.”
Find an AARP event near you here.
-Check out sites like SoFi Learn. This is a financial education site that makes money literacy topics more digestible.
-Books! There are tons of books about personal finance books that are not only educational, but they’re also fun to read. Check out what finance experts recommend here.
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