 |
 |
 |
 |
 |
 |
  |
What Others Are Saying
A selection of research studies and reports are featured below. The first section focuses on financial literacy in America. The second section highlights research from the Investment Company Institute or ICI members examining personal savings issues. Links are provided for those resources freely available on the web.
Financial Literacy Research
Delivery
of Financial Literacy Programs
A report of focus group research on delivering financial education programs.
(Maude Toussaint-Comeau and Sherrie L.W. Rhine, December 2000)
—Federal Reserve Bank of Chicago
Financial Literacy: An Overview of Practice, Research, and Policy
“…
many challenges remain in identifying the most effective and most efficient
means of providing relevant information to educate consumers at appropriate
points in their financial life cycle.” (Sandra Braunstein and
Carolyn Welch, November 2002)
Financial Education and Private Pensions
“…
exposure to financial education—both at the workplace and in
high school—improves a respondent’s knowledge of relative
asset returns and their understanding of the features of their pension
plan.” (Dean M. Maki, January 2001)
—Federal Reserve Board
Goodbye
to Complacency: Financial Literacy Education in the United States
2000-2005
Updates the study undertaken in 2000 (see below). “The nation’s
financial education advocates and educators have made much progress during
the past five years. Helping people transition from dependency to self-reliance,
however, is not an easy task. Research to date and the experience of
extant program managers and educators demonstrate that it is a worthwhile
and achievable objective. The challenge for private interests, policymakers,
and community organizers is to press on even in the face of seeming complacency.
There is much evidence that future individual, family, and national well
being depends upon the success of widespread financial education endeavors
during the coming years.” (Lois A. Vitt, Gwen M. Reichbach, Jamie
L. Kent, Jurg K. Siegenthaler, 2005)
Personal
Finance and the Rush to Competence: Financial Literacy Education in
the U.S.
Examines 90 personal financial education programs (community, federal, military,
faith-based, workplace, and college) and 150 websites; identifies seven elements
of effectiveness. (Lois A. Vitt, Carol Anderson, Jamie Kent, Deanna M. Lyter,
Jurg K. Siegenthaler, and Jeremy Ward, 2000)
—Institute for Socio-Financial Studies
Principles
and Best Practices for Investor Education
“… educating consumers so that they are able to obtain the understanding,
skills and knowledge necessary for them to become informed investors is critical
for their own financial security and for the continued growth and stability of
securities markets.” (January 2004)
—International Council of Securities Associations
Education
and Saving: The Long-Term Effects of High School Financial Curriculum
Mandates
State mandates for high school financial education “have significantly
raised both exposure to financial curricula and subsequent asset accumulation
once exposed students reached adulthood.” (B. Douglas Bernheim, Daniel
M. Garrett, and Dean M. Make, June 1997)
—National Bureau of Economic Research
Financial
Literacy in America: Individual Choices, National Consequences
“Because of the changing nature of the nation’s economy, Americans
must acquire the financial knowledge necessary to effectively manage their own
finances…. A joint effort is necessary to achieve national financial literacy.
No single organization or sector can achieve the goal of providing financial
literacy for all Americans. Working together is the only viable solution.” (October
2002)
—National Endowment for Financial Education
Improving
Financial Literacy: Analysis of Issues and Policies
This report analyses financial literacy surveys in OECD member countries;
highlights the economic, demographic, and policy changes that make financial
education increasingly important; describes the different types of financial
education programmes currently being offered; evaluates their effectiveness;
and suggests actions policymakers can take to improve financial education
and awareness. (October 2005)
—Organisation for Economic Co-operation and Development
Ignorance Is Not Bliss: The Importance of
Financial Education
“…
financial education can produce significant changes in how individuals
think about and plan for retirement.” (Robert L. Clark and Madeleine
d’Ambrosio, December 2003)
Effects of Financial Education Intervention on Attitudes Toward Saving
for Retirement
“…
both personality constructs and financial knowledge [are] significant
predictors of pre-retirement planning.” (Doug Hershey and John
Mowen, June 2000)
—TIAA-CREF Institute
Integrating Financial Education into School
Curricula
“Integrating financial education into required reading and mathematics
courses ensures that financial skills are taught and reinforced year
after year, with fewer resources than would be required if financial
education courses were to be offered separately.” (October 2002)
—U.S. Department of Treasury Office of Financial Education
Hearing
on “Financial Literacy Education: What Do Students Need to Know
to Plan For the Future?”
Testimony from the National Council on Economic Education, Securities Industry
Foundation for Economic Education, and others. (October 2003)
—U.S. House Committee on Education and the Workforce
Hearing
on “The State of Financial Literacy and Education in America”
Testimony from AARP, the American Savings Education Council, Consumer Federation
of America, and others. (February 2002)
—U.S. Senate Banking Committee
Hearing
on “The Federal Government’s
Role in Empowering Americans to Make Informed Financial Decisions”
Testimony from Treasury, Education, the Securities and Exchange Commission,
and others. (March 2004)
—U.S. Senate Governmental Affairs Committee
Survey
of Financial Literacy in Washington State: Knowledge, Behavior, Attitudes,
and Experiences
“
The extent to which an individual demonstrates financial knowledge, more
financial experience, and more positive protective type financial behaviors
predicts the extent to which they would be more financially literate
and more effective in their financial management.” (Danna Moore,
December 2003)
—Washington State University
Evaluating Your Financial Literacy Program:
A Practical Guide
Checklists and questionnaires to help evaluate financial literacy programs.
(Katy Jacob, October 2002)
—Woodstock Institute
Research from the
Investment Company Institute and Institute
Members Related to Personal Savings
in America
Survey Shows Broad Support for Passage of H.R. 2121 as Investment
Firms Ready Cap Gains Distribution Estimates
“A new survey shows that nearly half of all Americans support legislation
to change the tax code so that fund investors with taxable accounts will
be able to defer taxes on reinvested distributions until fund shares
are sold.” (September 2005)
Americans
Favor Permanent Tax Benefits for 529 Plans, According to Survey
“Three-quarters (76 percent) of all Americans support making the
tax-free withdrawal benefit of 529 college savings plans permanent.” (April
2004)
—American Century and Opinion Research Corporation
U.S.
Workers Confident – But Not Well-Informed – About Retirement Income
“...nearly 65 percent of America's working respondents plan to
rely on their own retirement savings or income sources rather than Social
Security
or pensions,” a global survey from AXA Equitable finds. “High expectations
for retirement income may influence U.S. workers' hopes to continue working
in retirement, as 63 percent of those surveyed desire to hold a paid
job once retired.” (January 2006)
—AXA Equitable
Schwab
Survey Reveals New Insights Into Money Behavior and Concerns of Teens
This annual “Teens & Money” survey finds that “teens
are growing increasingly more active as financial consumers and have
strong fundamental values about money, but are in urgent need of learning
more of the ABCs of money management to temper their new forays into
the world of credit and debt.” (April 2006)
—Charles Schwab Corporation
Investors
Place Record High Importance on Effect of Taxes on Returns and Support
Tax
Cut Extensions
More than half the investors surveyed in Eaton Vance’s seventh
annual nationwide survey believe the economy would be hurt by a failure
to extend the 2003 Tax Act beyond 2008, when some of its provisions are
set to expire. “If investors are hit with substantial capital gains
this year, their enthusiasm for continued capital gains tax relief could
well build into a march on Washington come tax time.” (December
2005)
—Eaton Vance
Fidelity Estimates
$200,000 Now Needed To Cover Retiree Health Care Costs
In its latest annual calculation, Fidelity estimates that a 65-year-old
couple retiring today will need $200,000 to cover medical expenses in
retirement. The estimate does not include any long-term care costs and
assumes the couple has no employer-sponsored retiree health care. (March
2006)
New “Fidelity Retirement Index” Reports
America's Retirement Readiness
“The new “Fidelity Retirement Indexes” revealed that the
typical working American household, whose primary decision-makers are age 43
on average, has saved $18,750 for retirement and is expecting to cover
the majority of retirement expenses through Social Security and pension
benefits. By itself, retirement savings may only provide 10 percent to
20 percent income replacement.” (June 2005)
—Fidelity Investments
Emotions and Human
Impulses Drive Retirement Investment Decisions
In a report entitled, “Psychology, Emotion, Investing and Retirement:
Exploring Participant Behavior in Defined Contribution Plans,” ING
discusses steps employers can take to help 401(k) plan participants make
better investment decisions. (February 2006)
Consumers Say Financial Services Should be Easier
Among other findings, a survey sponsored by ING and conducted by Roper
reveals that nearly half of those surveyed believe that retirement
planning is more difficult than parenting. When asked how managing
their money could be made easier, survey respondents asked for clear,
straightforward information coupled with an understanding of their
individual needs and products and services to meet those needs. (November
2005)
—ING
401(k)
Plan Asset Allocation, Account Balances, and Loan Activity in 2004
This research concludes that “consistent participation in 401(k) plans
remains essential to successful saving.” The study also notes that, although
widely available, 401(k) plan loans are rarely used and that lifestyle and lifecycle
funds are increasing in popularity both among plan sponsors and plan participants.
(September 2005)
The Influence of Automatic Enrollment, Catch-Up, and IRA Contributions
on 401(k) Contributions at Retirement
Among other findings, this research concludes that “under a wide
range of scenarios, workers can save enough through 401(k) plans over
a full career to replace a significant portion of their pre-retirement
income in retirement” and that “automatic enrollment in 401(k)
plans increases participation rates dramatically, particularly among
lower income workers.” (July 2005)
The Individual Retirement Account at Age 30: A Retrospective
“IRAs [are] the largest component of the $11.6 trillion U.S. retirement
market….Experience from changing the rules governing IRAs shows
that individuals respond to incentives that encourage the use of IRAs
to build retirement assets.” However, “Incentives work best
when rules, structure, and provisions are simple, understandable, and
predictable.” (February 2005)
Profile of Households Saving for College
Nearly two thirds of parents participating in this survey are saving
to pay for their children’s college educations, more than 90%
are using taxable investments to do so, and their “use of education-targeted
savings programs is likely to grow in the near future.” (October
2003)
—Investment Company Institute
Counting
Their Nest Eggs Before They Hatch
Among other findings, this survey shows that pre-retirees are overestimating
projected retirement assets. “Today’s pre-retirees seem
to be basing their nest egg calculations on ‘aspiration’ rather
than ‘reality.’” (November 2005)
—MainStay Investments
The MetLife Retirement Income Decisions Study
Examines retirement income behaviors and attitudes among the “Silent” Generation. “Perhaps
the last generation to rely heavily on pension plans and Social Security
benefits, a large majority of them were able to retire before the age
of 65.” (June 2005)
—MetLife Mature Market Institute and Mathew Greenwald & Associates
Regrets
About Retirement Savings? You’re
Not Alone
A nationwide survey of Baby Boomers reveals that Boomers “have
unrealistic expectations when it comes to retirement: they regret how
they’ve saved yet expect a comfortable retirement lifestyle.” (March
2005)
Women Are More Confident In Their Investing Abilities But Many of Those
Surveyed Lack Understanding of Investment Vehicles
“Despite feeling more knowledgeable than they did five years ago, 80%
of women surveyed wish they had learned more about investing growing
up.” (November 2004)
—OppenheimerFunds, Inc.
Financial
Experience and Behaviors Among Women
A survey of 1,000 American women aged 25-68 with an average household
income of $50,000 concludes their lives are “a balancing act,”
often resulting in “inaction when it comes to financial decision making.”
Today’s
women are very aware of the importance of financial and retirement
planning. However, “awareness and basic knowledge are not inspiring
women to take the appropriate actions that will help ensure they maintain
their desired lifestyle....” (June 2006)
Reinventing the
Defined Contribution Plan: Research, Analysis and Recommendations
“By simplifying plan design, using the best elements of the traditional
defined benefit model, educating participants on generating retirement
income, and delivering retirement-income solutions, plan sponsors can
help dramatically improve retirement outcomes for their employees.” (February
2006)
Roadblocks to Retirement
“Americans today face a new set of challenges in reaching their
long-term retirement goals.
As a nation of consumers and borrowers, they are haunted by a persistent
focus on short-term
spending and gratification.” (2005)
—Prudential Financial
A
Profile of Financial Maturity
This study identifies six beliefs and habits for achieving financial
security: 1) realistic expectations, 2) resisting the temptation
for quick rewards and fads, 3) patience in the face of adversity,
4) greater satisfaction from saving rather than from spending,
5) ability to tolerate above-average risk, and 6) receptivity
to advice on how to save and invest. (April 2006)
The Truth about Retirement: Advice from the Recently Retired
“[M]any retirees were surprised to discover that they had lower
incomes and higher expenses than they had anticipated.... their biggest
regret was not saving earlier in life and saving more along the way.” (November
2004)
—Putnam Investments
Retiree Health Care: Individuals Picking Up Bigger Tab
“Today’s seniors each spend, on average, more than $9,200 per year on
health care costs. Individuals need to be as informed as possible about
their options and plan ahead for funding retiree health care.” (Marilyn
Moon, July 2005)
College Savings Options and the Impact of Savings on Financial Aid
“[T]he impact of parental savings on student’s financial aid is
likely to be much smaller than was previously estimated.” (Jennifer
Ma, March 2005)
Understanding The Impact of Employer Matching on 401(k) Saving
“[E]mployer matching significantly raises 401(k) saving: doubling the
match rate would raise employee contributions by 25 percent.” (Gary
Engelhardt and Anil Kumar, June 2003)
—TIAA-CREF Institute
Turning Workers
into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design
Given workers’ indifference to retirement savings incentives, the
results of this research “underscore the need for alternative approaches
beyond matching contributions, if retirement saving is to become broader-based.” (November
2005)
Catch-up Contributions in 2004: Plan Sponsor and Participant Adoption
“Only 13% of eligible plan participants made a catch-up contribution in
2004….For plan sponsors and providers, these results underscore
the importance of general retirement savings education and the value
of new automatic savings increase features within DC plans.” (April
2005)
Expectations for Retirement: A Survey of Retirement Investors
“There is a fundamental misalignment between retirement goals and current
assets and savings rates….About one-third of retirement investors
are “on track”—likely to generate an income replacement
ratio of 70% or greater in retirement.” (November 2004)
Lessons from Behavioral Finance and the Autopilot 401(k) Plan
“Research from the field of behavioral finance suggests that many
defined contribution plan participants are not active, self-motivated
decision-makers,
as is often assumed….the autopilot 401(k) addresses the
needs of these reluctant savers.” (April 2004)
—Vanguard Center for Retirement Research
