Clueless about retirement? 43% have no idea what a 401(k) is

NEW YORK — In a startling revelation about America’s financial literacy, a new survey finds that nearly half of Americans still scratch their heads when it comes to understanding what a 401(k) is. Specifically, the national survey of 2,000 Americans, evenly split by generation, reveals that 43 percent of respondents don’t know what a 401(k) is.

The new poll examined Americans’ financial literacy, commitment to learning and adopting healthy money habits, and feelings regarding their bank accounts and financial futures. The results expose a significant lack of confidence among respondents regarding their financial literacy, with only 30 percent believing they could win a game of personal finance trivia. Over a third (35%) don’t know what “interest” is in a financial context.

The study, commissioned by Beyond Finance for Financial Practice Week and conducted by OnePoll, also revealed that with these startling gaps in financial knowledge, only two in five respondents (39%) consider themselves more financially literate than others.

Another 39 percent admit they procrastinate when implementing healthy financial habits. Gen Z Americans are most likely to procrastinate (49%), while baby boomers are the least likely (22%).

The top reasons respondents cited for postponing personal finance tasks include stress (25%), feeling their financial health is already poor and can’t get any worse (16%), and general forgetfulness (13%).

“Unfortunately, avoiding looking at your finances and making healthy changes is incredibly common,” says Dr. Erika Rasure, chief financial wellness advisor of Beyond Finance, in a statement. “Some people tend to neglect taking stock of their financial situation, and others can become nervously consumed by it. There’s a middle ground to take when improving your financial health — learn healthy money habits, pay attention, and make small, achievable adjustments to your spending and habits.”

401(k) plans information on smartphone and IRS website
A national survey of 2,000 Americans, evenly split by generation, reveals that 43 percent of respondents don’t know what a 401(k) is. (Photo by Tada Images on Shutterstock)

The study revealed the average American typically checks their banking app twice daily. Exactly half of respondents say they feel nervous when opening their banking portal, with Gen Z feeling most uncomfortable (65%). In comparison, baby boomers feel the most calm (26%), and over a quarter of all respondents avoid signing into their banking apps on a daily basis altogether (26%).

When it comes to budgeting habits, eight in 10 respondents try to hold themselves accountable to a monthly budget, with millennials and baby boomers tying for the best at making financial plans (81%). Of those who create a monthly budget, respondents only stick to it 66 percent of the time on average, with baby boomers exhibiting the highest accountability (76%) and Gen Z deviating the most from their budgets (58%).

For those trying to save money, the most popular strategies include buying on-sale items (53%), using coupons and discount codes (47%), limiting spending on clothing (45%), and shopping at discount stores (42%). However, a considerable portion of Americans resort to more drastic measures to save money, such as infrequent social outings to bars and restaurants (39%), limited travel or not traveling at all (36%), rarely or never buying coffee at coffee shops (35%) and rarely or never buying gifts (32%).

Notably, 33 percent of respondents claim they never take vacations. Finances also influence relationships, as nearly four in 10 (39%) say that their or a partner’s unhealthy spending habits have negatively affected their relationship. A majority of those in relationships (63%) agreed that learning about personal finance as a couple would increase their chances of improving money habits successfully in the future.

“The first step in a happier financial future is education,” Dr. Rasure says. “The more you know about money and personal finances, the more equipped you’ll be to make better decisions and create a plan to meet your goals. That’s why Financial Practice Week is important. We want to encourage people to learn the money habits and practices they’ve been putting off so they can make progress toward a more stable, optimistic future.”

Survey methodology:

This random double-opt-in survey of U.S. adults split evenly by generation (500 Gen Z, 500 millennials, 500 Gen X, and 500 baby boomers) was commissioned by Beyond Finance between Feb. 16 and Feb. 22, 2024. It was conducted by market research company OnePoll, whose team members are Market Research Society members and have corporate membership to the American Association for Public Opinion Research (AAPOR) and the European Society for Opinion and Marketing Research (ESOMAR).