It’s a problem, and an indication that despite positive strides there is still a long way to go in investor knowledge and education of even the most basic information about retirement saving.
TD Ameritrade released a new survey of 1,006 Americans, titled Retirement Savings Pop Quiz: Exploring Americans’ understanding of 401k and IRA accounts which examines their understanding of 401k and IRA accounts.
401ks
Sadly, just one in five Americans (19%) know the 401k-contribution limit for 2019 ($19,000), and in some sort of means-testing misunderstanding, the majority believes that the contribution limit depends on their income (27%).
Only a third (33%) of Americans know how much they’re paying in fees for their 401k account, and just half of Americans (52%) are aware they can contribute to both a 401k and traditional IRA account.
IRAs
Traditional IRAs don’t fare much better. Just a third of Americans (35%) know the 2019 contribution limit for a traditional IRA ($6,000), with 25% saying it depends on your income.
Only a quarter of Americans (26%) are aware that a nonworking (or low income-earning) spouse can contribute to a traditional IRA, and a majority of Americans (60%) mistakenly believe that you need to be in a certain tax bracket to qualify for contributing to a traditional IRA.
The survey was conducted online within the United States by The Harris Poll on behalf of TD Ameritrade from February 13-20, 2019, among 1,006 U.S. adults aged 22 and older with at least $10,000 in investable assets.
The findings follow the results of a similar survey released in February from The American College New York Life Center for Retirement Income. Only 26 percent of older Americans with investable assets of at least $100,000 were able to pass that retirement income literacy quiz, which asked 38 questions over a variety of topics such as taxes, Medicare, Social Security and retirement plans like 401ks.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and 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. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.