43% of Americans Don't Know What a 401(k) Is

Forty-three percent of Americans do not know what a 401(k) plan is, according to a national survey of 2,000 Americans conducted by OnePoll for Beyond Finance.

Furthermore, 35% do not know what compound interest is, according to the survey for the debt consolidation website conducted in February, the New York Post reports.

Four in 10 (39%) say they procrastinate when trying to implement healthy financial habits This drops to 22% of Baby Boomers but spikes to 49% of Gen Z.

Asked why they put off taking care of their personal finances, 25% cite stress, 16% point to feeling despair over poor financial health, and 13% say they just forget. An even 50% feel nervous when opening their banking portal on their phones or laptops.

“Unfortunately, avoiding looking at your finances and making healthy changes is incredibly common,” says Dr. Erika Rasure, chief financial wellness advisor of Beyond Finance. “There’s a middle ground to take when improving your financial health. Learn healthy habits, pay attention, and make small, achievable adjustments to your spending and habits.”

Eighty percent say they have a monthly budget, but they only stick to it 66% of the time.

Asked how they are trying to save money, 53% say they buy items on sale, 47% use coupons and discount codes, 45% have cut back on clothing purchases, and 42% shop at discount stores.

Additionally, 39% have stopped eating out or going to bars, 36% have curtailed travel, 35% rarely or never buy coffee at specialty shops, 33% don’t travel on their vacations, and 32% rarely or never buy gifts.

“The first step in a happier financial future is education,” 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.”

As for the specific needs of Baby Boomers, Motley Fool reminds them to avoid three common mistakes:

• Putting their kids’ college or adult children’s financial needs ahead of retirement savings;
• Relying too much on Social Security; and
• Underestimating health care costs as they age

If a person contributes $400 a month to a 401(k) or individual retirement account earning 10% a year over 30 years, Motley Fool estimates, they will end up with $790,00 in savings. Of course, a 10% return is very bullish.

Regardless of the return, even people in their 50s or 60s can still make sizeable contributions to their nest egg.

Some 75- and 80-year-olds are either still working or returning to work, according to financial news reports. There’s two main reasons why. First, there’s inflation, which is making it difficult for seniors on a fixed income to afford groceries, housing, prescription drugs, and medical costs.

Fidelity estimates the cost of health care in retirement for someone retiring in 2023 at age 65 is $157,500. That doesn’t even count nursing home or long-term care costs.

Then, there is the ever-higher benchmark for retirement. Northwestern Mutual found in a recent survey people think it will take $1.46 million in savings to retire comfortably.

The average retirement savings for families between the ages of 56 and 61 is $163,577 and the mean is $21,000, according to the Economic Policy Institute.

So, for those who don’t even know what a 401(k) workplace retirement savings plan is, they had better figure that out — quickly.