Back in the early 70’s, a hair color product called “Loving Care” pitched women by telling them “you’re not getting older, you’re getting better” (video here). Sadly, and as is so often the case, reality and advertising don’t correlate. And since I am getting decidedly older (I just had a birthday), this new research makes me especially nervous. The study shows that irrespective of education level or gender, Americans become considerably less literate about money matters after age 60 while becoming increasingly confident that their decisions are the right ones. It’s a recipe for disaster.
The authors of the study gave a test measuring knowledge of investments, insurance, credit and money basics to over 3,000 subjects of various ages and found “a statistically strong and consistent decline in financial literacy among older respondents.” More specifically, financial literacy dropped about 2% each year starting after age 60, falling from about 59% correct on the test of pretty basic financial information — hardly a great score — for those in their 60s to a dreadful 30% for those 80 and above. At the same time their abilities are declining their confidence is growing (and not just about money).
This news is particularly troubling because we are asking seniors to do so much more financial maneuvering today. They are being asked to consider delaying retirement and Social Security, to manage their retirement portfolios and withdrawal rates (more and more often without pension income), to make decisions about annuitization and guaranteed income, to deal with long-term care, and more.
Those of us who are getting closer to 60 than we might like would be well advised to make sure our “financial house” is in good order, that our long-term plans are in writing and shared with our families, and to at least consider the value of a competent and trusted advisor to help manage our finances and (increasingly) ourselves.