# Basic Financial Literacy - why is it SO uncommon? **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [March 29, 2023, 3:10pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841 "2023-03-29T15:10:24Z")\ **Posts on this page:** 20\ **Page:** 9
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [April 2, 2023, 2:56pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/161 "2023-04-02T14:56:59Z")
> [@F.U.Shakespeare](#): > > > [@Voyager](#): > > > > Ever try the retirement income planners from these companies? They are designed to scare you. Increase your income and savings and they increase the amount you need to retire so you’re always behind. > > Yes. They base ‘need’ on income, as opposed to expenses. > > Imagine two people earning $100,000/yr. One of them spends it all; the other saves half of it. But the planners will tell them both they’re behind… I’ve been a withering critic of the Financial Planner/Advisor business but at least in this area my experience has been that they do base your targets on your spending rather than on gross income. I’ve had “checkups” with Fidelity, Vanguard and BOA Merrill and the hall told me I was on track based on our spending of ~60% of our income for the last few years. The Merrill Lynch guy did try to scare us into products that are more “tax efficient” by talking about how tax rates are going to skyrocket in a couple of decades. Of course they want us to move into Annuities on which they will get a cool 3% up front. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [April 2, 2023, 3:36pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/162 "2023-04-02T15:36:00Z")
I think Voyager might be talking about online planners , not about speaking to a person. I tried using those planners a couple of times and gave up . They all said I needed a couple of million more in the bank to retire and didn’t account for my pension. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [April 2, 2023, 6:31pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/163 "2023-04-02T18:31:52Z")
You say that like it’s a bad thing. The vast majority of people probably do better in the long haul if they’re terrified that they won’t actually save enough for retirement, and start saving vigorously as a result. But I think in general the idea that most people are far more concerned about having $200 in their bank account now, rather than say… $423 15 years from now (assuming 5% rate of return compounded monthly). That’s the catch; I think it’s a failure of… imagination(?) in that people can’t really conceive of how if they forego $200 today, it’ll be worth more than twice that in a relatively short period of time. I feel like the trick is to do so in a way where you don’t actually ever see that $200 in your bank account in the first place- so you do it by direct depositing into your savings account, or having your employer just take out whatever percentage into your 401k before direct deposit. ---
**Author:** ![Tamerlane](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tamerlane/32/7602_2.png) [@Tamerlane](https://boards.straightdope.com/u/Tamerlane)\ **Post date:** [April 2, 2023, 6:41pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/164 "2023-04-02T18:41:17Z")
> [@bump](#): > > But I think in general the idea that most people are far more concerned about having $200 in their bank account now, rather than say… $423 15 years from now (assuming 5% rate of return compounded monthly). Don’t forget to factor in 15 year of inflation as well 😉. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 2, 2023, 6:41pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/165 "2023-04-02T18:41:59Z")
> [@doreen](#): > > I think Voyager might be talking about online planners , not about speaking to a person. I tried using those planners a couple of times and gave up . They all said I needed a couple of million more in the bank to retire and didn’t account for my pension. That’s right, the online checks for retirement planning that are more sales tools than anything else. My Merrill Lynch guy did a Monte Carlo simulation of my status up to 95, including our actual spending and even including the money we expected to inherit. That was 10 years ago, and it turned out to be pretty accurate, though since the market went up more than their 50% prediction we did better than predicted - in the only10% chance of having this much money range. It probably helps that I understand Monte Carlo simulations for it to make sense. I hope no one believes the standard online tools, since by playing with the parameters it is easy to see how they are rigged. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [April 2, 2023, 6:42pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/166 "2023-04-02T18:42:32Z")
> [@bump](#): > > You say that like it’s a bad thing. The vast majority of people probably do better in the long haul if they’re terrified that they won’t actually save enough for retirement, and start saving vigorously as a result. Only to a point. There are plenty of people who would stop saving altogether if you told them they need $2 million to retire and they only had $50K at the age of 50. And it’s not because they are financially illiterate (although they might be) - it’s because they know they will never under any circumstances have that $2 million and will therefore not be able to retire. And if I’m going to have to work until I die , then why not enjoy the money in the present ? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 2, 2023, 6:48pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/167 "2023-04-02T18:48:18Z")
> [@bump](#): > > I feel like the trick is to do so in a way where you don’t actually ever see that $200 in your bank account in the first place- so you do it by direct depositing into your savings account, or having your employer just take out whatever percentage into your 401k before direct deposit. Or use buckets, which is Thaler’s term for splitting money into chunks for different purposes. People are weird about this. They found that a painter, say, treats money from working on a job over the weekend for someone differently from money made from his employer. The danger of the online nonsense is that if a person finds that they can never get ahead, they may give up instead of saving a reasonable amount. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [April 2, 2023, 8:42pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/168 "2023-04-02T20:42:49Z")
> [@Voyager](#): > > The danger of the online nonsense is that if a person finds that they can never get ahead, they may give up instead of saving a reasonable amount. Or worse, get into “get rich quick” schemes out of desperation to catch up. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 2, 2023, 9:04pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/169 "2023-04-02T21:04:02Z")
> [@doreen](#): > > Only to a point. There are plenty of people who would stop saving altogether if you told them they need $2 million to retire and they only had $50K at the age of 50. I’ve seen that '2 million to retire" number, and it’s nuts for a person near the median income. Even at zero interest, 2 million would let you pull out $100,000 per year for 20 years. At 5% interest, you could withdraw $100,000 per year indefinitely. Most people don’t come close to that income while they are working. In fact, most people don’t even earn $2 million in their entire lives. The median income in the US is $31,000. Even a median household won’t earn $2 million over 30 years. The same goes for child raising, The headlines now say that it costs $310,000 to raise a child. My mom raised two of us on little more than minimum wage. ---
**Author:** ![SCAdian](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/scadian/32/3292_2.png) [@SCAdian](https://boards.straightdope.com/u/SCAdian)\ **Post date:** [April 2, 2023, 9:10pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/170 "2023-04-02T21:10:55Z")
And then there are the people (who may have already been mentioned) who can barely manage junior high school level math… ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [April 2, 2023, 9:33pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/171 "2023-04-02T21:33:23Z")
Re: People who decline to participate in their company 401K which is essentially free matching money… They just can’t conceive of waiting for a long term gain tomorrow by sacrificing a smaller gain today. I’m pretty confident that these same people would fail the marshmallow test. ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [April 2, 2023, 9:49pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/172 "2023-04-02T21:49:24Z")
> [@Sam\_Stone](#): > > The median income in the US is $31,000. Cite? According to [Motley Fool](https://www.fool.com/the-ascent/research/average-us-income/): > The national average U.S. income in 2021 was $97,962. The median U.S. income in 2021 was $69,717. To be sure, there are widely varying assertions of median and average incomes in this country. But this article claims to use data from the Census Bureau, and that data shows that over half of all American households earn more than $50k per year. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 2, 2023, 9:57pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/173 "2023-04-02T21:57:57Z")
Be very careful about stats on household income versus individual income. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [April 2, 2023, 10:06pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/174 "2023-04-02T22:06:14Z")
I have to admit that I’m surprised that they don’t couch the ideal retirement savings as some multiple of your income, taking into account lesser expenses while retired. I mean, 2 million is a ridiculous number for someone whose career income tops out at 50k a year, but 750k might not be. (75% of 50k x 20 years of withdrawals) > [@LSLGuy](#): > > Be very careful about stats on household income versus individual income. Yeah, that posted article seems to be talking households without actually saying so explicitly. From what I’ve found, the average individual income is around 71k, and the median individual income is around 54k. [How Much Does the Average American Make in 2022? | First Republic Bank](https://www.firstrepublic.com/insights-education/how-much-does-the-average-american-make) ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [April 2, 2023, 10:26pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/175 "2023-04-02T22:26:15Z")
Yeah, I think you guys are right about the Motley Fool article I posted…that’s probably household income. The [Bureau of Labor Statistics](https://www.bls.gov/news.release/pdf/wkyeng.pdf) states that the weekly median income in the last quarter of 2022 was $1085, which calculates to about $56,575 annually. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 2, 2023, 10:29pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/176 "2023-04-02T22:29:31Z")
I got the number right from Google. I Googled ‘US Median income’, and that’s the number that pops up. The source is [Datacommons.org](http://Datacommons.org), and you can see that table here: [https://datacommons.org/place/country/USA?utm\_medium=explore&mprop=income&popt=Person&cpv=age,Years15Onwards&hl=en](https://datacommons.org/place/country/USA?utm_medium=explore&mprop=income&popt=Person&cpv=age,Years15Onwards&hl=en) That said, maybe the $2 million is household savings, which means we should use household income, which is around $71,000. It’s still a crazy-high retirement estimate. ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [April 2, 2023, 10:39pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/177 "2023-04-02T22:39:30Z")
> [@Sam\_Stone](#): > > I Googled ‘US Median income’, and that’s the number that pops up. So I wonder if that number includes all Americans, from infants to centenarians. The last article I linked was data from all those who are earning wages, I believe. Obviously there would be a big difference in the numbers, depending on the datasets. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [April 2, 2023, 10:53pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/178 "2023-04-02T22:53:33Z")
The source data claims to be the US Census, but it’s not clear how they got that number. The Census page has sourced numbers: > **[American Community Survey (ACS)](https://www.census.gov/acs/www/about/why-we-ask-each-question/income/)** > > The American Community Survey is the premier source for information about America's changing population, housing and workforce. In particular: > Median Household Income: [69,021 dollars](https://data.census.gov/cedsci/table?tid=ACSDT5Y2021.B19013&hidePreview=true) > Median Earnings for Full-time, Year-round Male Workers: [57,803 dollars](https://data.census.gov/cedsci/table?tid=ACSDT5Y2021.B20017&hidePreview=true) > Median Earnings for Full-time, Year-round Female Workers: [46,823 dollars](https://data.census.gov/cedsci/table?tid=ACSDT5Y2021.B20017&hidePreview=true) And a somewhat different breakdown: [![](https://i.imgur.com/3iyo1rE.png) ](https://i.imgur.com/3iyo1rE.png) I guess you could get down to $31k if you include a bunch of unemployed or marginally employed people. ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [April 2, 2023, 11:10pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/179 "2023-04-02T23:10:22Z")
Found the source. As suspected, it’s the median income of the US populations 15 years and older. That’s a rather misleading figure in the context of this thread (it counts teenagers, retirees, and people who don’t work at all) [https://data.census.gov/table?q=S0701&tid=ACSST5Y2019.S0701](https://data.census.gov/table?q=S0701&tid=ACSST5Y2019.S0701) ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [April 2, 2023, 11:27pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/180 "2023-04-02T23:27:56Z")
BLS releases Usual Weekly Earnings data with different cuts. IIRC it was most recently a touch under $1100 for full time workers. Regardless, I agree $2M doesn’t make sense for a lot of people. [Previous page](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841.md?page=8) [Next page](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841.md?page=10)