As pensions have gone nearly extinct, the responsibility of funding later life has shifted from employers to workers. Retirement risk is now increasingly carried by individuals in defined contribution plans, rather than by defined benefit sponsors. The rise of an “employee as retirement planner” model asks consumers to be in control of understanding how to save and invest for their futures. Planning for income in retirement now requires a proactively engaged individual. If you want to pursue financial freedom in the future, you’ll need to become financially literate, starting today.

In a study commissioned by Jackson,1 we found that many consumers who own products don’t actually have a detailed understanding of how those products work – including the risks and downsides, as well as upside potential. Consumers who have educated themselves about these products, however, are likely to feel more confident about their abilities to make investment decisions.

Fortunately, financial literacy can be acquired by consumers of all backgrounds – you don’t have to have a mathematics or financial background to understand investments, retirement or financial planning. 

The Beginner’s Cheat Sheet to Pursuing Financial Literacy

Know What You Value.
Your dreams, values and finances are all interconnected. Your personal priorities will influence your financial strategy.

  • If leaving a legacy behind is most important to you, your investment strategy will likely look different from the strategy for someone who values travel and leisure above all else or someone who hopes to do a lot of charitable giving in retirement. Before finding an advisor or charting out next steps, write out your must-have, nice-to-have and must-avoid lifestyle choices.
  • Your personal values will also influence your investment strategy, as well as the possible returns and risks you should anticipate. For example, more than half (52%) of women investors are interested in or currently engaged in impact investing (investing that aims to generate specific beneficial social or environmental effects in addition to financial gain per Investopedia), compared to 41% of men.2 Therefore, some investors may decide to forgo some market opportunities and the universe of investments available will be smaller. It is up to you what tradeoffs you’re willing to make to maintain certain values in your investment strategy.

Evaluate Your Debts.
Take stock of the debts you’re managing. If you’re not already actively paying them down, create a plan to start. This will give you a greater sense of control and a realistic idea of how much you can set aside to start investing. Here’s an example of the “snowball method” of paying down debt:

  1. Start by listing your debts from smallest to largest (not including your mortgage).
  2. Then, make minimum payments on all debts, except the smallest. Throw as much money as possible at that debt as you can.
  3. Once that debt is gone, take that payment and apply it to the next-smallest debt while continuing to make minimum payments on the rest. The more you pay off, the more your freed-up money grows.

This is just one method of starting to get on top of your debts. Others prefer to start with the debt with the highest interest rate. For many, however, this can create the discouraging feeling that debt isn’t getting paid off quickly enough, causing them to lose steam and abandon focused efforts to pay it off. Consult with an advisor for deeper insight into what works best for your particular situation.

Learn the Basic Types of Investments.
Familiarize yourself with the following common types of investments:

  • Stocks, also known as equities, represent partial ownership of a company. If a company performs well, the stock can increase in value. If a company performs poorly, the stock value can decline and you can lose the money you invested. While stocks are more volatile than other investments, they have a higher return potential over long time periods.
  • Bonds are generally more stable than stocks, with lower return potential. They are also known as fixed-income investments, representing a loan made by an investor to a borrower (typically corporations or government entities). Bonds are subject to market and interest rate risk if sold prior to maturity. The value of a bond will decline as interest rates rise.
  • Annuities* can provide a steady stream of income during retirement. An annuity is a contract between you and an insurance company. You make a lump sum payment or series of payments and, in return, can receive a regular income stream in retirement. Any earnings accrue on a tax-deferred basis and therefore are subject to ordinary income tax upon withdrawal. Learn more about how annuities can support family goals on the Studio.
  • Cash can include savings accounts, CDs and money-market accounts. While cash and cash equivalents are generally low risk, they also offer the lowest return potential.
  • Mutual Funds and Exchange-Traded Funds (ETFs) invest money pooled from many investors into an assortment of bonds, stocks and other investments. The value of mutual funds and exchange traded funds will fluctuate and may lose value.

"Managing investments for retirement now requires a proactively engaged individual. If you want financial freedom in the future, you’ll need to become financially literate, starting today."

Determine Asset Allocation: (Potential) Risk vs. (Potential) Reward.
Determining the appropriate asset allocation for your investment strategy is a critical step toward meeting your goals while managing your risk. There is no one-size-fits-all approach to asset allocation. Your ideal mix will depend on your risk tolerance, age and time frame until retirement. Asset allocation does not ensure a profit or protect against a loss. Since stocks are volatile but have the most return potential, they may be more appropriate for younger investors, who have decades to ride out any volatility and take advantage of compounded earnings. Bonds, alternatively, are aligned with predictability, which can make them more palatable for older investors with lower risk tolerance. 

There is a wide variety of risk within stock investments, however, and a financial advisor can help you sort out exactly which stocks make the most sense for your portfolio, which leads us to our final step:

Find a Financial Advisor.
Now that you’ve defined your personal and financial goals, and developed an understanding of investment vehicles and possible asset allocations, you can partner with an advisor who can help guide your financial journey.

When searching for possible candidates, you can reference the questions we list below. You’ll likely want to check the work background and disciplinary history of your finalists, and make sure you read and understand any paperwork you’re asked to fill out and sign. It’s just as important, however, to make sure you select an advisor that considers your emotional and physical wellness when tending to your financial wellness. Before you choose an advisor, revisit the values you prioritized earlier in the Know What You Value section and make sure your advisor prioritizes these aspects of planning as well.

Questions to ask when interviewing investment professionals:

  • What experience do you have working with people like me?
  • Do you have any special areas of expertise?
  • What investment product and services do you recommend to your clients? Why?
  • What is your usual hourly rate, flat fee, or commission?
  • Are you compensated in any other way for handling my account? If so, how and how much?
  • Do you impose any minimum account balances? If so, what are they? And what happens if my portfolio falls below the minimum?
  • How will you communicate investment performance results to me?

Once you’ve found your financial advisor, set an investment strategy, and started investing, you’ll want to have a clear understanding of how your portfolio is performing. Our next feature will build your financial literacy around evaluating your portfolio’s performance.


1 “The Journey to Financial Literacy,” Metia Insights, April, 2019.

2 “Women and Financial Wellness: Beyond the Bottom Line,” Merrill Lynch and Age Wave, March, 2018.


*What is an annuity?

Annuities are long-term, tax-deferred investments designed for retirement. Variable annuities involve risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½. Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.

All investments involve risk and may involve loss of principal.

The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.

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