Researchers argue that financial illiteracy impedes plan participants’ ability to determine how to invest their savings, and propose mandated employer-provided financial education to address limited employee financial literacy.
Individuals who scored higher on a financial literacy quiz were more likely to save for retirement and more likely to have savings outside of a retirement plan.
Among those that do offer financial literacy programs, 51% say workers increase their contributions to supplemental savings plans, 43% say workers become more engaged with compensation issues, and 41% say they see cost savings for the jurisdiction that at least partially offset the expense of offering the program.
“Both financial literacy and short-run impatience play important roles in determining retirement saving, even after controlling for education and income,” researchers say in a study report.
The Financial Elements program breaks down challenging concepts into simple elements to increase financial literacy and reduce employee financial stress through education and behavioral coaching.
A collaborative survey between the U.S., Britain and Australia shows working-age employees struggle with retirement planning and saving.
A significant number of Americans underestimate how much they are likely to spend on health care in retirement, according to a recent Financial Engines survey.