Think there isn’t a need for 401k financial wellness and education? Think again (and quickly).
Almost 40 percent of Americans can’t describe a 401k, according to Gobankingrates.com.
In order to test the financial knowledge of Americans, the consumer research site quizzed respondents from all 50 states on basic finance terms and concepts.
It included questions with multiple choice answers like what a CD offered by a bank stands for, the definition of net worth and the variables that impact a credit score.
The results are disheartening, to say the least.
Nearly half of survey respondents 65 and older do not know what impacts a credit score. Fully 58 percent of those aged 18 to 24 do not know what a 401k is, and less than a third of that demographic can name the three major credit bureaus.
“Results for the question, ‘Which of the following describes a 401k?’ were encouraging in that nearly two-thirds (63 percent) selected the correct answer for this basic finance term: ‘Retirement savings vehicle,” according to the website.” Twenty percent of respondents answered ‘Tax credit for retirement.’ While not correct, this answer indicates that respondents at least knew that 401ks are related to retirement.”
With just 63 percent answering correctly, it adds, that means nearly two-fifths of respondents were incorrect. A closer look at how different age groups answered revealed:
- People ages 55 to 64 had the most correct answers, with 76 percent choosing “Retirement savings vehicle.”
- More than 60 percent of respondents aged 25 and older (five age groups total) answered correctly.
- The age group with the fewest correct answers was the 18- to 24-year-old group (43 percent).
The furthest away from retiring, it might be understandable that young millennials (ages 18 to 24) would know the least about a retirement vehicle like a 401k.
But still, for every age group—excluding 55- to 64-year-olds—at least one-fifth incorrectly selected “Tax credit for retirement” as the answer.