Tackling retirement longevity through financial literacy
How well do your members understand retirement longevity?
Photo by Cottonbro Studio
Recent reports have unveiled a serious knowledge gap within significant segments of the U.S. and Canadian populations concerning life expectancy during retirement. This gap is related to longevity literacy, which refers to an understanding of how long people tend to live upon reaching retirement age. Deficits in longevity literacy have the potential to profoundly impact financial planning and saving capabilities for later years.
Insights from the 2023 Personal Finance (P-Fin) Index survey, conducted by the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business, underscore the ramifications of low-level longevity literacy.
The reports highlight that less than 40% of adults accurately estimate the average lifespan at retirement age, indicating a clear gap in understanding longevity. Further findings expanded on the concept of longevity literacy, revealing that only 35% could accurately estimate lifespan from age 65, with merely 12% demonstrating robust longevity literacy by accurately answering key questions on the subject.
In Canada, a survey by the Canadian Institute of Actuaries (CIA) mirrors these trends, revealing that Canadians underestimate their life expectancy by almost four years. Additionally, Canadians underestimate long-term care needs, with statistics suggesting a higher percentage requiring such care than anticipated.
Source: OECD
Surya Kolluri, head of the TIAA Institute, emphasizes the critical importance of improving longevity literacy, stressing its direct impact on retirement security and the mitigation of longevity risk. Strong longevity literacy directly correlates with better retirement readiness, as seen in individuals who actively plan for retirement and exhibit higher confidence in their financial preparedness.
Source: GOBankingRates (U.S.)
Source: GOBankingRates (Canada)
Addressing this knowledge gap requires more than just information dissemination, given terminology barriers and misconceptions. Annamaria Lusardi, University Professor at The George Washington University and GFLEC's Academic Director, emphasizes the need for a more comprehensive educational approach to bridge this gap.
Credit unions can play a pivotal role in addressing low longevity literacy by implementing robust financial education programs. Equipping members with accurate knowledge about retirement longevity and its financial implications can significantly enhance their readiness for retirement. Considering solutions such as our own financial education program, It's a Money Thing, could be a strategic step for credit unions to effectively impact low longevity literacy while empowering members to secure their financial future.
Tim McAlpine is the Founder & CEO of Currency Marketing. He is best known for developing the It's a Money Thing Financial Education Program that credit unions from around North America are using to connect with new young adult members. He is also a driving force behind CUES Emerge, an emerging leader program that combines online learning, peer collaboration and an exciting competition component.
