Last week I asked for help in coming up with some trivia questions that dealt with retirement, and I wanted to thank everyone for all of the suggestions. The questions were a success and it turned out to be very educational for everyone who took part. In doing this exercise I was also able to come away with some shocking conclusions.
Over the course of three days I met with approximately 500 people, and they ranged in age anywhere between early 20s into the 70s. The scary thing is that the majority of people did not know the answers to even the easiest of questions. For example, the following questions gave people the most trouble:
- What is the penalty for taking a distribution from your retirement account before age 59 1/2?
- At what age can you take a distribution from your retirement account without a penalty?
- When do you become eligible for Medicare?
- When is the earliest you can begin to receive normal Social Security benefits?
- Does your 401k plan have a maintenance fee?
- How often do you receive statements?
Most of these questions were multiple choice or true and false. I would have to say that regardless of age, 80% of people did not know the answer to the above questions. I had many other more detailed questions that the readers provided in my other post, but I was focusing on the few very easy ones to determine what people knew.
There were even some people who were in their late 50s or early 60s, and when asked about Social Security and Medicare, had no idea at what age you could begin receiving benefits. Maybe I’m a bit too optimistic, but I would think that someone who is just a few years from retirement would at least have an idea when they qualify for important retirement benefits.
The other interesting responses came in regards to the questions about the plan that they are participating in. Their plan does not have any fees, yet many of the people who got that question insisted that there are fees. One person even told me that they are being charged $12 per quarter! (which we determined was false after they brought their statement down for me to look at) Others had no idea that they were receiving a company match while others thought they were not allowed to contribute more than 3% (they can actually contribute up to 75%).
More Education is Needed
This exercise highlighted the need for more education. I realize that not everyone cares to know every detail about their finances, but it is important to know some basics. Knowing when you qualify for Social Security or Medicare, or how long it takes to become vested in your pension, or even whether or not your being charged a fee in your retirement plan can be important pieces of information when trying to plan for your future.
Over the past few years there has been a strong push to get people enrolled in their retirement plan, and that is certainly a good thing. People do need to be aware of their plan which offers a nice match, and to take advantage of it. But just becoming enrolled in a plan isn’t enough. It is important to ensure that participants truly understand the benefits of their plan, how it works, and how other outside retirement benefits work together.
This certainly gives me some things to think about and work on over the coming years. Hopefully with some further education I can see a significant improvement in the trivia question answers.
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Filed Under: Odds and Ends
About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.