The 2018 Aegon Retirement Readiness Survey has exposed the stark fact that people, all over the globe, really don’t understand the basic concepts of investment and inflation indicating that the world is unprepared for retirement. Indeed, many of the participants failed the test, with big potential consequences for their future security.
The three-question test revealed, beyond the sobering lack of financial literacy, some rather curious data in Aegon’s annual survey, published recently. For example, some 20 percent of workers surveyed in China envisioned spending retirement with a robot companion.
But before we get to that, take a look at this question—which only 45 percent of people around the world got right:
Q. Do you think the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”
The possible answers? True, false, do not know and refuse to answer.
Sixteen percent of people got it wrong. “Do not know” was chosen by 38 percent. In the U.S., 46 percent of workers got it right. Good for you, America—though Germany beat you handily. (The answer, in case you were wondering, is false.)
It was an inflation question that had the highest percentage of wrong answers, however. More than 20 percent of workers didn’t grasp how higher inflation hurts their buying power. Given that declining health was the most-cited retirement worry, at 49 percent, and health care is an area (in the U.S., especially) with high cost inflation, well, that makes the subject something older folks should have down cold.
The survey asked workers—about 1,000 per country—what global trends would affect their retirement plans. “Reduction in government retirement benefits” was the most popular answer worldwide, chosen by 38 percent globally; in America it was 26 percent. The countries most worried about cuts to government benefits? Brazil and Hungary, at about 53 percent.
Concern with developing Alzheimer’s or dementia was cited by 33 percent globally. The highest percentage of people citing it as a worry were in Spain, at 53 percent. In the U.S., 31 percent were worried about it.
Across the board, though, workers didn’t seem to recognise the huge impact that basic changes in the labor force, technology and the climate will probably have on their retirement plans.
Many workers may well be in denial about how long they can actually work. The survey found workers generally plan to retire around age 65. The sobering reality is that 39 percent of retirees globally retired sooner than planned, according to the report. Of those, 30 percent stopped working earlier than they had planned for reasons of ill health, and 26 percent due to unemployment/job loss.
And those robots? The survey asked about “ageing friendly modifications or devices” people envisioned having in their homes. Thirty-five percent of workers in India, 34 percent in Turkey and 18 percent in the U.S. figured ageing could include video monitoring devices. Then there are the robots, which 20 percent of Chinese workers see coming in retirement, compared with 6 percent of American workers.
The report is intended as a call to action. Recommendations include working financial literacy into educational curricula, promoting a more positive view of ageing and allowing universal access to retirement savings arrangements.