We often hear how teens and young adults lack financial literacy. They may not understand investment concepts such as the power of compounding or the importance of diversification.
With age comes wisdom, right? not necessarily. Many older adults—from mid-career professionals to retirees—understand the basics of spending, saving, and investing. But just because you're 50 or 70 doesn't mean you're financially literate.
“We need financial literacy throughout our lives,” said Genevieve Waterman, director of corporate partnerships and engagement at the National Council on Aging in Arlington, Virginia.
Retirees face countless challenges in managing their money. Retirement planning requires a deep dive into taxes (when and how much income to defer), Social Security (when to file), and Medicare (what it covers — and what it doesn't).
Those enrolled in Medicare may assume it will cover almost all of their health care for life, Waterman said. But Medicare does not cover long-term care and most dental care and other common needs.
Choosing an annuity also tests your financial intelligence. Insurers continue to roll out new annuity products with a complex web of fees, policy provisions, and surrender charges. It's difficult even for the smart, diligent shopper to sift through all the permutations.
To address knowledge gaps among today's teens, there is talk of expanding financial literacy courses in high schools and colleges. But it is more difficult to design and deliver educational programs for older people.
“Financial education targets young people as if once you get it you are set for life,” said Cindy Cox Roman, president and CEO of HelpAge USA, a Washington, D.C.-based nonprofit. “In fact, people need lifelong learning. Behaviors, circumstances and needs change over time.
Seniors may benefit from courses that teach them how to spot scams, finance their retirement, and pay off debt. With regard to debt management, for example, they can learn how to leverage home equity to cover future health care and other expenses.
Speaking of debt, many parents (and grandparents) agree to co-sign for a family member's student loan. However, they may not realize the long-term consequences of subsidizing a child's tuition fees.
For the youngest baby boomers, those born in the late 1950s and early 1960s, financial literacy is crucial. They are the first generation for whom a traditional pension was not the norm. Instead, many self-fund their retirement through a 401(k) or other deferred contribution plans.
“The rude awakening people are having is that they put money in a 401(k) and now they have to pay taxes on that money when they take it out in retirement,” Cox Roman said.
As you approach retirement, here are two ways to improve your financial knowledge:
1. Read and take notes: When you read articles or books about personal finance, take notes. Highlight key points so you're more likely to remember them. Whether you enter relevant tips into a dedicated file on your computer or keep a handwritten, numbered list in a folder on your desk, the trick is to create a well-organized system to help you keep important work items that you can easily access when needed. Arises.
2. Request for experience: You can improve your financial literacy yourself. Better yet, involve others in your quest for knowledge.
Many financial advisors offer free consultations to potential clients. Whether you hire them or not, you can use this conversation to extract useful information.
Another option: Enroll in a self-study module in person or online – and enlist friends to sign up. “You're more prepared to retain what you learn in a financial education class if one or more of your peers participate as well,” Cox Roman said. This way, you can help each other reinforce important learning points over time.
Inviting groups to join you in your efforts to boost your financial literacy builds trust all around. Just knowing that you're not alone — and that you're not the only one who finds certain topics confusing — can bring comfort.
This becomes even more important for elderly retirees. Those 80 and older had the highest average loss — $1,500 — from online shopping scams.
Olivia S. said: “People who feel lonely or depressed are more likely to fall victim to fraud,” Dr. Mitchell, a professor at the Wharton School at the University of Pennsylvania. “And many seniors don’t understand how vulnerable they are to financial fraud.”
more: “I'm paralyzed with fear.” My wife and I are 60 years old, have two houses, pensions, and $950,000 saved for retirement. We want a counselor but are afraid of making the wrong choice. What is our step?
Read also: I'm 65 and semi-retired, and I've raised $1.8 million myself through “a lot of risky small caps,” tech stocks, and some ETFs. I also have 20% cash. Am I doing it right? Do I need a counselor to help?
