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This one great idea can make everyone better with money, older Americans say

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Surveys regularly show that older Americans have regrets about lots of things — working too much, choosing the wrong partner, not taking care of their health, etc.

There are often financial regrets too, such as not saving enough, and investing to little for retirement. 

This last regret has many reasons: Everything from the burden of school loans, the crushing cost of housing, raising children and more. So is the fact that most employers these days don’t offer pensions, which places even more pressure on workers to finance retirement themselves.  

It’s probably too late for many seniors to do much about their finances now. But when surveyed about this by the Social Security Administration (SSA), they have an idea that can help succeeding generations of retirees do better than they did. 

That idea is a no-brainer: Financial literacy should be taught in school. The SSA cites data showing that four-fifths of adults—80%—wish they had been required to complete a semester or yearlong course focused on personal finance when they were in high school. It also said that 84% of those approaching retirement age (60+ years old) said “spending and budgeting” should be taught in schools, and that even more, 88%, think that such courses should be a graduation requirement.

“Lifetime financial education can be a helpful tool in preparing for retirement,” says Beth Bean, senior vice president, research and impact, National Endowment for Financial Education, in a Social Security Administration blog post. 

Learning financial literacy isn’t—or shouldn’t be—difficult. Some of the basics include things like creating a budget, living within your means, setting aside something each month, using credit wisely, and having a diversified, long-term investment outlook. There are more basics, of course.

Perhaps one of the most important things future retirees can learn is just basic common sense. I know a young lady who, upon turning 18 about a decade ago, was given $100,000 as part of an inheritance. She promptly went out and blew it on a car. I guess she didn’t get that cars depreciate the moment you drive them off the lot, and cost a ton to insure and maintain. Had she put that 100 grand into, say, the S&P 500 index
SPX,
-1.79%
back then, it would now be worth about $270,000. And 30 years from now when she’s approaching retirement? Sigh. 

The old folks are right. Financial literacy is a big deal. Indeed, with Social Security under stress—its Trust Fund is slated to run dry in 2034, which would lead to sharply reduced benefits—teaching future retirees how to better handle their money could be a hedge against future problems. 

But that’s a tall order. Only 15 states are currently committed to “guaranteeing all high-school students will take a stand-alone Personal Finance course of at least one semester prior to graduation,” reports NextGen Personal Finance (NGPF), a group dedicated to improving financial literacy. The group has set the lofty goal of ensuring that “By 2030, all U.S. high-schoolers will be guaranteed to take at least one semesterlong Personal Finance course before graduation.” 

Meanwhile, the SSA has other data that’s worth exploring: 

  • In its financial well-being poll conducted during the COVID-19 pandemic, 85% of respondents confirmed some part of their personal finances was causing them stress. For 31% of respondents, that concern was “having enough saved for retirement.”

  • In that same poll, 70% said they made financial adjustments due to the COVID-19 pandemic. Of that group, 27% increased contributions to their emergency savings, retirement savings, or other savings or investments. In comparison, 21% tapped into emergency savings—or borrowed against retirement savings. 

The financial stress revealed by the Social Security Administration is worth exploring a bit more. If 85% of respondents indicated financial stress during the pandemic, the figure is undoubtedly elevated today for yet another reason: the highest rate of inflation in four decades, which has eroded the value of whatever savings seniors have. Simply put, when inflation is high, retirees need to draw down assets faster to make ends meet.

Adding further pressure to senior finances is the expiration of federal aid programs that helped Americans get by during the pandemic. The Coronavirus Aid, Relief, and Economic Security Act (CARES) authorized direct payments to individuals, generous monthly rebates to families with children, and extended unemployment benefits for laid-off workers, but that ran out two years ago—before inflation kicked into high gear. For cash-strapped seniors, it has been one thing or another.

Credit: marketwatch.com

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