Most Adults Fail This Simple 5-Question Retirement Knowledge Quiz — Can You Pass?

A recent survey by the TIAA Institute and the Stanford-based Global Financial Literacy Excellence Center (GFLEC) reveals significant gaps in Americans’ knowledge about retirement essentials like Medicare, Social Security, and workplace savings plans. 

The survey, which polled nearly 3,900 people aged 18 and over in January 2024, showed disappointing results. Fewer than 40 percent answered at least three of the five retirement-related questions correctly.

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The average participant answered just two questions correctly, with a troubling one in five unable to provide any correct answers. This lack of retirement fluency could seriously affect financial security in later years.

Senior economist at the TIAA Institute, Paul Yakoboski, pointed out the direct effects of this knowledge gap. "How long retirement tends to last has a direct impact on how you manage assets and draw them down," he noted. Knowledge of Social Security and its workings, for example, can help determine the optimal time to start benefit claims, which can significantly increase retirement income.

Despite these challenges, the survey showed some positives. Older generations like the Silent Generation and Baby Boomers performed better on the retirement questions, likely due to their closer proximity to or current experience with retirement. They scored around 50 percent correct answers on average.

Thasunda Brown Duckett, CEO of TIAA, stressed the importance of financial literacy, saying, "This report shows that if we're going to improve retirement outcomes, we have to start by improving our understanding of how to save and how long our retirements will be." She explained that while there is no quick fix or instant solution, enhancing access to educational resources and acting purposefully will set Americans on the path to financial health and resilience.

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Test Your Retirement Knowledge Curious about how well you understand retirement planning? Here are the five key questions from the 2024 TIAA Institute/GFLEC survey. See how your answers stack up:

1. Social Security Accuracy: Which statement about Social Security is false? A. Social Security benefits depend on earnings in the last two years of employment. B. Social Security provides benefits if you become disabled before retiring. C. Social Security payments continue for life, regardless of longevity. D. Don’t know.
2. Medicare Coverage: What percentage of a retiree’s health care expenses does Medicare typically cover? A. Over 90%. B. About two-thirds. C. About half. D. Don’t know.
3. Maximizing Retirement Savings: If Latisha contributes $2,000 to a 401(k) plan and her employer matches up to $5,000, how much will she have by year’s end if the fund grows by 5%? A. $2,100 in a 401(k). B. $2,100 in an IRA. C. The same amount either way. D. Don’t know.
4. Planning for Longevity: What's the best way for Susan to ensure she doesn't outlive her savings? A. Buy an annuity. B. Buy life insurance. C. Nothing can be done. D. Don’t know.
5. Life Expectancy: How long is a 65-year-old man expected to live, on average, in the U. S.? A. 14 more years (age 79). B. 19 more years (age 84). C. 24 more years (age 89). D. Don’t know.

For women, how long is a 65-year-old woman expected to live? A. 17 more years (age 82). B. 22 more years (age 87). C. 27 more years (age 92). D. Don’t know.

Answers: 1. A; 2. B; 3. A; 4. A; 5. B (for both men and women).

Whether you’re a retirement planning pro or just starting to learn the ropes, consulting with a financial advisor is a smart move. A professional can offer tailored advice that fits your personal financial situation and retirement goals. Remember, it’s never too early or late to start planning for your future. Expert guidance can go a long way in ensuring you make the most of your retirement years. 

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