Most Americans Illiterate Regarding Retirement Income Planning

• "Only 27 percent of respondents report having a written retirement plan in place – despite the fact that 63 percent say they have a relationship with a financial advisor."

You'd Think They'd Know Better

One of the things that most surprised Littell about the study results is that the quiz takers were all individuals in the period of their lives when they should be paying close attention to retirement issues.

"We limited the group to people age 60 to 75 so it was only people that [should] understand these things as they approached and moved into retirement," Littell said. "We thought that people probably didn't know a lot about many of these complex issues, but there really wasn't a comprehensive study before to validate that."

The suspicions of Littell and Hopkins proved true, and then some.

"We discovered that only 20 percent got a passing score of 60 percent on the quiz. The average score was about 42 percent, so America's knowledge about some of these key issues that affect their retirement is relatively low, which worries us," Littell stresses.

Another study finding that surprised Littell and Hopkins was how little participants understood the benefits of delaying Social Security.

"I was surprised when we asked them even simple questions about Social Security claiming. There has been a ton of press about that issue," Little'll said.

How Did They Get it all so wrong?

So why do so many retirees or soon-to-be retirees know so little about how to manage their retirement income? Both Littell and Hopkins have some theories.

"I think people make a lot of really important decisions without much information, especially financial decisions," Littell said. "They choose to take Social Security based on what their friends and family have done. I've seen this in my life. I've tried to convince people that should wait until past retirement age, and they look at me like I'm crazy."

Hopkins points to misplaced confidence.

For example, "We asked how competent do you feel on long-term care that you know the issues. Everyone rated very competently, almost across the board. But then we see only 40 percent of people get the [corresponding] question right. So not only are people getting the questions wrong but they think they know the areas. That to me was one of the big takeaways."

Hopkins also said that the study results reveal a failure on the part of retirement planners to better educate their clients. As both note, the majority of those taking the quiz all sought out advisors.

"Part of our study also raises the question of, if you do have a financial advisor, what role does that financial advisor have in educating the client," Hopkins said. "A financial advisor probably wouldn't say that, 'my first job is to educate my client with all this information', but maybe providing more education can give them more tools to make [better] decision on their own."

It certainly raises the question of where should these individuals be getting this information from, Hopkins explains.

"Some of that goes back even further: that we don't do a good job at [teaching] financial literacy at a young age," Hopkins complains. "We have Americans that are financially illiterate. And retirement income planning is possibly more difficult than your general financial literacy, If we don't do a good job with the basics up front, it's going to be very difficult for them to understand more complex issues—annuity pricing or long term care planning or even Social Security claiming issues."