What Don’t You Know About Your Financial Future?

What Don’t You Know About Your Financial Future?

Most of us make financial decisions throughout our lives without ever receiving much formal financial education.

We learn as we go. We open our first bank account, apply for credit, enroll in an employer retirement plan, buy a home, save for our children's education and eventually begin thinking seriously about retirement.

Along the way, we accumulate experience. But experience and financial education aren't necessarily the same thing.

You may know how much you have in your 401(k), but do you know how that money will eventually become retirement income?

You may know that Social Security is part of your retirement plan, but do you understand how the age at which you claim benefits can affect what you receive?

You may have a will, but do you know how your beneficiary designations interact with it?

You may know that Medicare generally becomes important around age 65, but do you know when you need to enroll or how its different parts work?

These aren't unusual gaps in knowledge.

They're examples of something that affects nearly everyone at some point:

We don't always know what we don't know.

Financial Education Isn't About Becoming a Financial Expert

The goal of financial education isn't to turn everyone into a financial planner, accountant, attorney or investment professional.

It's about becoming an informed participant in your own financial life.

That means understanding enough to recognize when a decision is important, knowing the questions worth asking and understanding when you may need additional information or professional guidance.

Consider buying a car.

You don't need to be an automotive engineer to purchase one. But knowing the difference between financing and leasing, understanding an interest rate and recognizing the importance of the total purchase price can help you ask better questions and make a more informed decision.

Your financial future works much the same way.

The more you understand, the better prepared you are to evaluate your options.

Some of Your Biggest Financial Decisions May Happen Only Once

One reason financial education matters is that many important financial decisions aren't things we practice repeatedly.

You may retire only once.

You may make a Social Security claiming decision only once.

You may decide how to receive a pension only once.

You may enroll in Medicare for the first time only once.

You may establish an estate plan and then revisit it only periodically.

And the financial environment surrounding those decisions can involve unfamiliar terminology, rules, tax considerations and choices.

Waiting until you're facing the decision can make the learning process considerably more difficult.

That's why financial awareness should begin before the decision needs to be made.

How Many of These Questions Can You Answer?

Take a moment and consider the following.

Do you know:

• Approximately how much income you may need when you retire?

• Where is that retirement income expected to come from?

• How Social Security benefits are calculated?

• What could happen if you claim Social Security before or after your full retirement age?

• How withdrawals from different types of retirement accounts may be taxed?

• What Required Minimum Distributions are and when they may apply?

• The difference between Medicare Parts A, B, C and D?

• Whether the beneficiaries listed on your financial accounts are current?

• The difference between a will and a trust?

• What could happen financially to your household if you or your spouse died?

• How inflation could affect your retirement income over 20 or 30 years?

• What questions should you ask before making an important investment, insurance or retirement decision?

If you can't confidently answer every question, you're certainly not alone.

More importantly, that's the point of financial education.

The objective isn't to already know all the answers.

It's to recognize that there are questions worth exploring.

What You Don't Know Can Affect the Options Available to You

Financial knowledge becomes especially valuable when you still have time to act on it.

Learning about retirement planning at 45 or 55 may provide opportunities that aren't available when you're already retiring.

Understanding Social Security before claiming benefits gives you an opportunity to consider your choices before making an election.

Learning about Medicare before reaching eligibility can help you understand the decisions and timelines you may encounter.

Reviewing estate planning concepts while you're healthy gives you an opportunity to organize information and discuss your wishes with your family.

Education creates something extremely valuable:

time to ask questions.

And asking the right questions before making a decision can be just as important as eventually finding the answer.

Financial Information Is Everywhere. Understanding Is Different.

Today, finding financial information isn't difficult.

A search online can produce thousands of articles, videos, calculators, opinions and recommendations within seconds.

The harder question is:

What information actually applies to you?

A headline may tell you the "best age" to claim Social Security.

A video may tell you how much you "should" have saved for retirement.

Someone on social media may recommend a particular investment strategy.

But financial decisions rarely exist in isolation.

Age, income, family circumstances, taxes, employment, health, retirement goals and many other factors can affect the questions someone should consider.

Financial education helps provide the foundation needed to put all that information into context.

Instead of simply asking:

"What should I do?"

you begin asking:

"What should I understand before I decide?"

That's a much more powerful question.

Awareness Comes Before Confidence

Financial confidence doesn't necessarily come from having more money.

It can come from better understanding.

Understanding the terminology.

Understanding your choices.

Understanding the questions to ask.

And understanding when you need additional information.

That's why The Society for Financial Awareness (SOFA) focuses on financial education.

SOFA educational workshops are designed to help individuals better understand important financial topics in an educational environment. The purpose isn't to turn attendees into financial experts.

It's to help people become more informed about the decisions they may encounter throughout their lives.

Because sometimes the most valuable thing you can learn isn't an answer.

It's the question you didn't know you needed to ask.

Start With One Question

Think about your financial future today.

What is one area where you aren't completely confident that you understand your options?

Retirement?

Social Security?

Medicare?

Estate planning?

Taxes?

Investing?

Managing debt?

Start there.

You don't need to learn everything at once. You simply need to keep learning.

What Don't You Know Yet?

Financial decisions become easier to evaluate when you understand the questions, terminology and choices involved.

Explore an upcoming SOFA Tampa educational workshop and discover the questions worth asking, before you need the answers.