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Abstract
In years past, many employees in the United States did not have to worry about funding their retirement. Social Security was stable, and most employees had a solid pension program. These pension programs took care of employees by making the investment decisions and taking on the investment risks to provide the employee with an adequate income for the rest of the employee’s life. This pension, along with Social Security, ensured that the employee had few worries about outliving their retirement funds. Today, the situation has changed. Social Security is expected to run out of money in 20 years, despite the government raising the eligibility age to receive benefits and reducing the benefits paid to employees. Many employers have moved from the defined benefit retirement plan to the defined contributions retirement plan. In the defined contributions plan the employee must make the investment decisions and assume the investment risks for their retirement account. This is a departure from the defined benefit plans in which the employer assumed these risks. The purpose of this non-experimental quantitative study was to assess the levels of preparedness for retirement and financial literacy for employees in the United States, and to evaluate these levels against the degree of awareness of actual financial literacy in order to predict preparedness for retirement. This research utilized a survey comprised of 110 respondents between the ages of 25 to 70 years old who were employed full-time in the United States. Findings indicate that older employees had higher levels of financial literacy (β.230, p=.012), and higher levels of awareness of financial literacy (β.290, p=.002). Furthermore, results show that participants who are aware of their current financial literacy are better prepared for retirement. Further research might investigate the relationship between employee awareness of financial literacy and the type of retirement account selected. Results of this study might be used to recommend options for increasing financial literacy for demographic groups shown to have lower levels, such as females and minorities.