Retirement Literacy Remains Low

More education needed to help older Americans prepare

Retirement literacy – understanding how to successfully plan for a financially secure retirement – remains low despite helpful information available to guide the growing number of people planning to retire.

“Four in five older Americans fail to understand the basics on how to successfully plan for a financially secure retirement,” according to The American College of Financial Services’ 2020 Retirement Income Literacy Survey. The college surveyed more than 1,500 retirees and pre-retirees ages 50 through 75 with at least $100,000 in assets. The poll found most Americans lack sufficient knowledge about retirement income and investment management, continuing the trends revealed in the group’s 2014 and 2017 surveys.

Most schools do not teach young people the basics of investing, financial planning, and preparing for retirement, according to Jim Merklinghaus, founder and president of JM Wealth Management in Vero Beach, Florida. For most, he said, the best solution is finding a well-educated financial advisor who can explain the various programs, strategies, and options available so consumers can properly plan for retirement.

JM head“Financial education is a primary concern for our firm,” Merklinghaus said. “We aim to teach people how to be able to retire, since you don’t get this information when you go to high school, college, or during your career. We essentially educate you to succeed.”

Understanding each client’s particular situation is crucial to creating a solid financial plan, Merklinghaus said. The most important question is always, “What is the purpose of the money? Is the money for college, retirement, emergency fund, etc. What is the time horizon for these monies as it relates to the investment choices available in the financial markets?” That answer indicates the guidelines for how JM Wealth Management will construct a comprehensive retirement plan.

“In our practice, we use a laddering structure that provides income models at different ages so they can keep up with inflation,” he continued. “We use different types of software programs, such as the Retirement Analyzer, to help us understand inflation’s impact. Inflation affects each item in a person’s budget differently as we go through the plan with clients. If your plan does not factor in inflation your money will fall short by at least 10 years in retirement.”

Individual clients need customized solutions, he continued. Not every program can be used for every client. Advisors must listen to their clients, find out how they want to use their money, and then structure a financial plan that meets their needs.

“You should also have plans A, B, C, and D, because life never goes perfectly for your clients,” Merklinghaus added. “As long as you can have a flexible plan that can meet a client’s changing needs, you will be able to successfully hit their target goal of what they’re looking to do for retirement. In many cases today, clients want to have the ability to retire, but that doesn’t mean that they have to retire.”

As Americans live longer lives than ever before, one of the largest concerns for many people is the possibility they will run out of money during retirement. The American College survey found only one-third of consumers consider themselves highly knowledgeable when it comes to planning for adequate retirement income.

“With our practice, it’s impossible for people to outlive their funds and it’s impossible for them to lose their principal with us,” Merklinghaus said. “Using our core products – no matter which age you’re at – you are not able to outlive the income that your money provides. We’ve created a synergy between monies that are invested in the market and monies that are invested in the core products that we use, which are fixed index annuities.”

Using this technique, he explained, clients can live off the income from investments while the market is high. When the market goes down, they can rely on annuities that provide contractually guaranteed payments.

“Instead of people taking a loss to their portfolio, they can use our products to be able to meet their monthly expenses,” Merklinghaus continued. “They’re able to wait out the paper losses until the market returns to its pre-loss position. This approach offers excellent opportunities because, as our portfolios keep pace with their financial plans, they don’t have to worry about how to invest their money during those down periods.”

Merklinghaus said his firm focuses on helping clients retire before Social Security benefits begin. He said most people live in retirement for 30 years, while some do so for 40 years. The first 15 years of retirement are typically the better years, he noted. However, Social Security tables are currently structured to provide full retirements benefits for new retirees beginning at age 66 to 70 depending on your year of birth.

“We feel the way the system is set up right now is totally incorrect,” he said. “You should really be focusing on getting retired by age 60. Then during the first 15 years, you will be 60 to 75 years old, so you can relax and enjoy retirement.”

Longevity and rising medical expenses have also made planning for long-term healthcare needs more important. The American College survey found only 31 percent of those surveyed had plans to handle long-term care funding, and just 23 percent had long-term care insurance.

“No matter how wealthy you are, a long-term care situation can severely affect your income,” Merklinghaus said. “These expenses also reduce the amount of money you can pass along to the next generation. Again, you need planning that will allow you to adjust your finances.”

Financial services professional also need to be able to react to unexpected changes and help their clients adjust. A recent example is the 2020 pandemic, when the CARES Act temporarily allowed early distributions for retirement plans such as IRAs and 401(k)s without penalty.

“We actually had our best year during COVID-19 because we had more opportunities than before,” Merklinghaus said. “The continuously updated legislation gave clients opportunities to be able to handle their money in a different way.”

He added JM Wealth Management experienced few challenges when the pandemic shut down businesses, as the firm was already conducting remote interactions with clients.

“Four years ago, we shifted our practice from New Jersey to Florida,” he said. “We have clients across the United States. That presented us a unique opportunity to operate our practice using Zoom meetings and conference calls pre-pandemic.”

For more information on JM Wealth Management, visit

3D CoverWhat You Don't Know About Retirement Income Can Hurt You! by Jack Tatar (Goodreads Author), Jeff Klauenberg, Michael Foguth, James Merklinghaus, Michael Tove, Kyle Winkfield, Kyle O'Dell, Will Heil, Shelley Giordano


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