More than half of employees failed a recent retirement plan knowledge quiz. How well would your clients do? “Unfortunately, many employees seem to know little more than the basics about their 401(k)—and feel far less positive about the benefit than their employers believe,” Fisher Investment 401k Solutions found in its 401(k) Wellness in the Workplace Survey, a follow-up to something similar released in 2017.
Many participants have a basic understanding of their retirement plan, the company added, but nearly 70% still didn’t pass the quiz.
“While generally aware of broad plan functions, they were much less certain about specifics. When employees don’t have a good grasp of the details behind their 401(k), they may not take advantage of it as much as they should, leading to less money and security in retirement. They may even end up suffering penalties due to their lack of education.”
Five Retirement Plan Questions That Stumped Participants
- Based on rules defined by the Internal Revenue Service at what age can you withdraw money from your retirement plan without a tax penalty?
27% of respondents answered correctly - True or False: In most cases, people can combine a retirement plan from their previous employer with a retirement plan with their current employer.
70% of respondents answered correctly - True or False: In most cases, people cannot borrow from their retirement plan.
67% of respondents answered correctly - True or False: The money I invest in a traditional retirement plan reduces my taxable income.
72% of respondents answered correctly - Select all the statements below that describe what a mutual fund is. You can select all of the statements or a mix of some of the statements to answer this question. If you are not sure what a mutual fund is, you can select “I’m not sure what a mutual fund is.”
23% of respondents only selected the correct two definitions.
Answer key (it’s a problem if you need it):
- Correct Answer: 59.5 years
- Correct Answer: True
- Correct Answer: False
- Correct Answer: True
- Correct answers: A mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors, and the decisions to buy and sell securities in a mutual fund are made by one or more portfolio managers.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
