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Not being financially literate can be dangerous to your wealth in retirement.
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Mar 3, 2021 8:00 AM EST
What advice then do experts have for older Americans with respect to their personal finances, retirement accounts, etc. What actions should they take and/or avoid?
A bit of background: Poor financial capability can erode well-being in later life, according to Understanding Debt in the Older Population, research co-authored by Annamaria Lusardi, a professor at the George Washington University School of Business and Olivia Mitchell, a professor the Wharton School of the University of Pennsylvania.
According to that research, older Americans, ages 51-61 carry debt due to student loans and unpaid medical bills; and having children also contributes to carrying debt close to retirement.
Advisers might want to consider the unique economic hurdles faced by women, two recent reports suggest.
It is well-documented that women are compensated at lower rates than men in similar roles and that they face the challenge of saving for longer retirements given their higher average life expectancies. But new research shows that Black and Latina women face greater financial challenges than white women, and that Covid-19 has hurt retirement prospects for women in general.
Reaching financial security can be more difficult for Black and Latina women in part because of lower overall wealth and a higher frequency of debt, a paper published last week by the TIAA Institute found. Contributing to those discrepancies are differences in education, employment, financial literacy and family structure.
Don’t confuse wealth creation with retirement saving
Don’t confuse wealth creation with retirement saving
Building retirement savings is not the same as wealth creation.
Wealth creation, and getting rich quick, are very tempting, especially in an era of high-flying stocks and mega-growth companies.
But stock grants and stock options today and the promises of wealth they offer are not a substitute for retirement security in 20 or 30 years. Outside of a retirement account, what is to prevent someone from spending a windfall when it lands? It is unclear how this equates to preparing for retirement.
Pensions & Investments on Feb. 8 reported that Tesla Inc. in 2020 did not make matching contributions to its 401(k) plan, and had not for three consecutive years.