Slashdot Mirror
The World Isn't Prepared for Retirement (bloomberg.com)
An anonymous reader writes: Most online quizzes are relatively mindless, promising to reveal which vegetable, sandwich or rock band best represents your personality. That was not the case for a short online test given to 16,000 people in 15 countries this year. It revealed just how unprepared a good chunk of the world is for retirement. The three-question test, given as part of the Aegon Retirement Readiness Survey 2018, measured how well people understand basic financial concepts. Many of the participants failed the quiz, with big potential consequences for their future security.
Beyond the sobering lack of financial literacy, there were some rather curious data in Aegon's annual survey, published on Tuesday. For example, some 20 percent of workers surveyed in China envisioned spending retirement with a robot companion. But before we get to that, take a look at this question -- which only 45 percent of people around the world got right: Q. Do you think the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund."
The possible answers? True, false, do not know and refuse to answer. Sixteen percent of people got it wrong. "Do not know" was chosen by 38 percent. In the U.S., 46 percent of workers got it right. Good for you, America -- though Germany beat you handily. (The answer, in case you were wondering, is false.) It was an inflation question that had the highest percentage of wrong answers, however. More than 20 percent of workers didn't grasp how higher inflation hurts their buying power. Given that declining health was the most-cited retirement worry, at 49 percent, and health care is an area (in the U.S., especially) with high cost inflation, well, that makes the subject something older folks should have down cold.
Beyond the sobering lack of financial literacy, there were some rather curious data in Aegon's annual survey, published on Tuesday. For example, some 20 percent of workers surveyed in China envisioned spending retirement with a robot companion. But before we get to that, take a look at this question -- which only 45 percent of people around the world got right: Q. Do you think the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund."
The possible answers? True, false, do not know and refuse to answer. Sixteen percent of people got it wrong. "Do not know" was chosen by 38 percent. In the U.S., 46 percent of workers got it right. Good for you, America -- though Germany beat you handily. (The answer, in case you were wondering, is false.) It was an inflation question that had the highest percentage of wrong answers, however. More than 20 percent of workers didn't grasp how higher inflation hurts their buying power. Given that declining health was the most-cited retirement worry, at 49 percent, and health care is an area (in the U.S., especially) with high cost inflation, well, that makes the subject something older folks should have down cold.
Throughout history, people worked until they were physically unable to work.
The idea of retirement came about through FDR's "New Deal." Even then, the "retirement age" of 65 was considered very old, considering that life expectancy at the time was 61! Since then, life expectancy has risen by at least 10 years, but the "retirement age" has not risen with it.
Financial literacy is needed, yes. But is "retirement" at 65 a realistic goal for most people?
It's hardly a surprise. In the US we're filled with "financial planners" and other similar people who pitch themselves as helping improve your financial life, when in fact they aren't even really obligated to make their clients fiduciary interests primary. They're nothing more than glorified stock salesmen, pushing high-load, low-yield branded mutual funds, crappy stocks and high-activity trading which they benefit from.
The sales pitch, even when its half-informative, is often a deceptive lure. Guy with shitty retirement planning breaks down and goes to a financial planner. Is told he's way behind the curve. Guy says "what about a no load mutual fund", and the planner is like "you could do that, but these days they only return 3% and based on my magic spreadsheet you need a more aggressive return, like my portfolio of targeted mutual funds and some individual company stocks where you can get that 10% yield you need to catch up".
So the guy buys into shitty funds and stocks that mostly likely just help the financial planner retire.
Financial planning education is non-existent in schools, fixing that would help. It would also help to crack down fucking hard on "financial planning" and require SIMPLE, BOLD PRINT, PLAIN ENGLISH, UP FRONT disclosures that planners are in the business of selling products, not in caring about your outcome. Or better yet, REQUIRE that financial planners (or whatever label you want to invent) MUST PLACE THEIR CLIENTS FIDUCIARY INTERESTS AHEAD OF THEIR OWN. If we had financial services that were about client interests and not just pushing shitty investments it would help everyone.
Brokers and salesman can continue their line of chicanery and fraud, but at least there would be a legitimate category of financial planners people could trust.
Mutual funds are pretty much a scam these days with so many fees,
This is nonsense. Fees are lower than ever.
Most of my retirement savings are in Vanguard index funds. No upfront or backend fees, 0.04% annual maintenance fee.
Here's some free advice:
1. Invest in index funds, and never in actively managed funds.
2. Never take financial advice from someone trying to sell you something.
It's already happening. Boomers say the younger generations are irresponsible and lazy and that's why they don't have a golden final salary pension scheme and half million pound house.
I am an older baby boomer, and I don't know any baby boomer that honestly believes "the younger generations are irresponsible and lazy ".
I'm sure there's some out there, but I'm sure there's morons in every generation. I just don't know any.
The people who are saying these things are almost all younger than we boomers, and/or are liars hoping to steal from whoever.
What the boomers I know believe is that a fundamentally dishonest media makes up all kinds of shit about people to drive sales.
They're making up shit about the millennials, and they're making up shit about baby boomers.
Pick any demographic that you're a part of, and consider the BS that you're being blamed for that you know isn't true. It's the same with the demographic that you're not part of.
Do you find it confusing when you see a millennial on the news repeating the "millennials are lazy, irresponsible, make bad choices" story?
I don't. I'm not at all confused when I see a liar; I just see a liar.
I came to say something similar.
The summary (haven't read the article of course, this is slashdot afterall) assumes that the world considers money based investments as a way of funding retirement. Not all the world agree with that model.
In France (for instance), retirement is mostly paid by taxation on the next generation. In many places, the community will take care of you. If my future well being is not based on market investment, why would I even need to understand it. This would be a purely academic skills.
Now, I am not arguing one model over the other one. I am just arguing that the article should really be entitled "the world does not understand how the American retirement system works". Which is not really surprising.