Baby boomers and Generation Z investors may have little else in common, but both struggle to understand financial risk.
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That’s one of the key findings from the TIAA Institute’s 2026 Personal Finance Index, which found financial literacy among U.S. adults fell to its lowest level in the survey’s 10-year history. Risk comprehension was the weakest category across every generation.
The index, produced by the institute and the Global Financial Literacy Excellence Center, surveyed 3,206 adults using 28 questions across eight areas of personal finance.
“Most clients have significant blind spots on topics that will directly shape their financial lives for decades to come,” said Evan Potash, executive wealth management advisor at TIAA Wealth Management, in an email. “Don’t wait for clients to surface these gaps. Diagnose them early and build foundational knowledge into every planning conversation.”
In 2026, financial literacy declined in five of the survey’s eight knowledge areas, with risk comprehension ranking at the bottom. Just 33% of Gen Zers answered risk-related questions correctly. Millennials and Generation Xers each scored 36%, while baby boomers scored the highest at 39%.
In the report, TIAA noted “a 10-year span of repeated cross-sectional data is insufficient to separate age effects from cohort effects.” While older generations posted somewhat stronger results, the broader takeaway, according to the report, is that Americans tend to “enter adulthood with very low financial literacy, and knowledge tends to remain low over time.”
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The weakest link: Risk comprehension
No matter how much an advisor tries to educate and prepare a client, making financial decisions involving risk is “inherently uncomfortable” and can trigger emotional reactions and behavioral biases, said Gloria Garcia Cisneros of Minneapolis-based Great Waters Financial via email.
“Risk is one of the most misunderstood concepts in personal finance because it requires people to make decisions under uncertainty,” she said.
The difficulty investors have with risk comprehension was also reflected in TIAA’s condensed version of the survey, dubbed the P-Fin 8, which included one question from each knowledge category. Results closely mirrored those of the larger survey, with respondents answering 46% of the questions correctly on average, versus 47% on the full survey.
One of the risk questions asked respondents to compare the expected value of two lotteries: “Lottery A pays a prize of $200 and the chance of winning is 5%. Lottery B pays a prize of $90,000 and the chance of winning is 0.01%. Expected winnings are greater in which lottery?”
Only 46% answered correctly; 22% got it wrong, while 30% admitted they didn’t know the answer and 2% skipped the question. On average, nearly two-thirds of responses to the survey’s risk-related questions were incorrect.
“Comprehending risk is the weakest knowledge area across every demographic, with only 36% answering correctly,” said Potash. “And it touches everything from insurance decisions to evaluating financial products.”
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What it means for advisors
The survey results highlight a familiar challenge for advisors: determining whether clients truly understand the risks they are taking, rather than simply expressing a willingness to accept them.
“Individuals know they should save and invest but far fewer understand what risk and diversification look like in practice when it comes to investing,” Cisneros said. “They may understand the concept of volatility, but understanding it emotionally when their portfolio declines are two very different things.”
One way to engage with clients, according to the report, is through improved risk literacy efforts. Such efforts “could yield significant financial benefits for many Americans and represents a critical area where targeted educational efforts are needed,” the report said.
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