Friday, February 17, 2012

Reuters on Financial Literacy

Reuters has a great piece this week on financial literacy and how not having it can impact retirement.  The whole thing is worth a read but here are some highlights.

On the implications of a lack of knowledge in the new era of retirement:

Experts often point to poor financial decision-making as a cause of the retirement security crisis. The problem has become more critical as we've moved away from professionally managed pensions and toward do-it-yourself defined contribution plans. Studies show workers do poorly managing their 401(k)s, including too-low contribution rates, infrequent rebalancing and maintaining too much exposure to equities in the last few years before retirement.
On gaps in financial literacy:
Not surprisingly, Mitchell says, men and women with higher levels of education know more about personal finance than those with less education. The research also shows gaps between whites and minority groups, with blacks and hispanics less likely to know than whites. And while men are more knowledgeable than women, men think they know more than they really do.
What can be done? The article points the need for much more education in schools, more focus on finances from parents, more budgeting by all adults and a realization from policy makers that this is a priority.