Showcase Listing

Fairfield Glade, a stunning master-planned community, is perched high atop the Cumberland Plateau, and offers serene mountain beauty as i...

Showcase Listing

Cresswind Georgia at Twin Lakes is a new, gated 55+ community in the metro Atlanta, Georgia area. With a focus on fitness, relationships,...

Showcase Listing

Embrey Mill® is an all-ages master-planned community located in Stafford, Virginia, just north of Fredericksburg, and offers a totally st...

Showcase Listing

Twin Oaks is a 55+ active adult community located in sunny Bradenton, Florida, and brimming with serenity and charm. Our private, pet-fri...

Showcase Listing

Brookfield Residential at Two Rivers is a brand new community designed for those 55+, and offers an abundance of opportunities for a vibr...


How Ready Are You for Retirement – A Quiz

Category: Financial and taxes in retirement

March 17, 2015 — In our book you can’t just be too prepared for retirement – it’s just too important to take a chance on not enjoying it. This is Part II of our Retirement Preparation Quiz, here is where you can find the Part I Quiz.

This version of the quiz is more about the financial side of retirement. It is inspired by a recent survey by the American College of Financial Services, an educational organization for financial professionals. That study found a dismally low level of preparation on several key questions about financial literacy. A majority thought they were doing a good job of saving to live comfortably in retirement, yet only 2 in 10 had a passing grade; no one got an A. The questions on their financial literacy quiz had questions relating to Social Security, taxation of retirement income, long term care, annuities, portfolio risk, life expectancy, and the impact of inflation on purchasing power. In the quiz below we have developed a few of our own questions that relate to each of these areas.

Take the quiz and keep track of your answers. Then go the bottom for the correct answers and see if you get a passing grade – you get to set the grade curve yourself! Let us know how you did in the Comments section. The important thing is to use this quiz as a learning tool, use it to get yourself ready!

1. At what age are you required to take Required Minimum Distributions from your IRA and/or 401(k)?
a. __ 65
b. __ 66
c. __ 70 and 1/2

2. Once established, which retirement plan is better from a tax standpoint?
a. __IRA or 401(k)
b. __Roth IRA

3. True or False: If you had a year where your income was much lower than normal for you, it would be a good time to convert to a Roth IRA.
a. __ True
b. __ False
c. __ No difference

Social Security
4. If you defer taking your Social Security, what is the age when you get the maximum benefit?
a. __ 62
b. __ 65
c. __ 66
d. __ 70
e. __ 75

5. Assuming Congress continues to do nothing to solve the problem, what will happen if the Social Security fund runs out of reserves in 20 or so years?
a. __ No one will get any more benefits
b. __ The fund has enough to pay about 70% of promised benefits
c. __ No one new coming into the system will get any benefits

Income basics
6. Which of these strategies is the least effective in helping you have enough money for a comfortable retirement:
a. __ Saving 3% more in each of the 5 years preceding retirement
b. __ Working 2 years longer
c. __ Deferring Social Security 2 years

7. Which of these investment options provides the best guarantee of future income?
a. __ An annuity
b. __ Individual growth stocks
c. __ A diversified mutual fund

8. On the day you retire, which of these hypothetical investment mixes would provide the best chance that you will not run of out money during your lifetime (we are not recommending any of these, just trying to make a general point)
a. __ 90% bonds/cash, 10% equities
b. __ 50% bonds/cash, 50% equities
c. __ 10% bonds/cash, 90% equities

9. Have you calculated how much money you need every year for a comfortable retirement, including a theoretical expense budget?
__ Yes
__ No

Living long
10. What is the average life expectancy of a male aged 65 years?
a. __ 80
b. __ 85
c. __ 90

11. What percentage of the population will need long term care at some point in their lives?
__ 40%
__ 50%
__ 60%
__ 70%

The study that inspired us
The online survey was conducted among 1000+ respondents ages 60-75 during June, 2014. The respondents had to have at least $100,000 in investable assets, not including their primary residence. The Study was done by the American College: New York Life Center for Retirement Income. It provides a number of interesting questions and facts that could improve anyone’s financial literacy.

For further reading:
Squared Away – Winging It in Retirement
Are You Ready for Retirement Quiz – Part I
The Worst Case Scenario About Social Security: Surprise
Our Social Security Quiz: A Learning Curve for All
How Much Should You Take from Your Retirement Funds Every Year

The Answers (no cheating!)

1. c. 70 and 1/2
2. b. Roth IRA
3. a. True. Converting a traditional IRA to a Roth IRA has tax consequences, so doing it in a low income year is often a good time to do it.
4. d. 70. The benefit stops increasing at that age, although it is indexed for inflation.
5. b. The fund has enough reserves to pay 70% of benefits, assuming nothing is done before then to remedy the situation.
6. a. Saving 3% more is less effective than working longer or delaying 2 years.
7. a. A good annuity has the best guarantee of future income. Individual stocks have the greatest degree of risk.
8. b. 50/50. You can also give yourself a correct answer if you chose 90 bonds/cash, because you have eliminated a lot of risk. Who knows what the magic balance is, but in general, experts believe you should reduce risk (equities) as you age, as a major downward move in the market could hurt you. However, if you eliminate all equities you run the risk that inflation will wipe out your ability to keep up with the cost of living. Ask your investment advisor what he or she thinks is the best balance for your situation.
9. a. This might be the most important question on the quiz. Without knowing how much you need to live on and what your income will be, it is just about impossible to be prepared. Give yourself a bonus if you have done this important step.
10. b. 85. But remember, this is the average. If you die before then the silver lining is you had less chance of running out of money. But if you live longer than that there is the possibility of bad news; does your budget have enough give to keep you living comfortably?
11. d. 70% of the population will need long term care at some point in their lives, according to the survey. Thanks to Ed for this link at

Comments? How did you like these questions? Any you thought were unfair or off the mark. Any surprises? Please share your thoughts in the Comments section below.

Posted by Admin on March 17th, 2015


  1. I scored 9 correct.

    by Caps — March 17, 2015

  2. Caps, You go, girl!

    by ella — March 18, 2015

  3. Got 9 of 10……now if I can get more financial resources I could make up my deficit to retirement which I’ve now pushed back to 70 (hopefully)

    by Frank — March 18, 2015

  4. I guess I’m ready. Which is good, since I’ve been retired for 6 years. I missed the last question. 70%–really? Sounds like an ad for long-term care insurance.

    by Linda — March 18, 2015

  5. I scored 6 out of 11 but I rate myself semi-retired and getting more knowledgeable. I know I would not have done as well if I took this quiz two years ago.

    by SharonA — March 18, 2015

  6. Linda – everyone is living longer; my dad was 94 and his sister was 97 when they passed. They were in good health until their 90’s – then they needed long term care. If they had only lived until their 80’s, they wouldn’t have so I can see where the 70% is true. Also, keep in mind that there are young people involved in accidents, strokes, etc., that also require long term care and that figure is included as well.

    by Susan — March 18, 2015

  7. 25 years remaining to fully retire at 70 (Military retirement in two years). Got 9 out of 11 of the questions. The 70% surprised me also. It’s good to know the answers, but what is done to be successful and not become a burden on my family or society is the biggest challenge.

    by Tonya — March 18, 2015

  8. Nine here, too, but the most important one–figuring out a budget–I had to answer no. Being 65 now . . . hmm . . . my dad died young (age 59), but on my mom’s side there is longevity. I hope to live 20 more years, but I will budget for 25. That is probably the safest thing to do!

    by Joanne — March 18, 2015

  9. I only missed 2 and I will be retiring next year. I am so ready!

    by Kathleen — March 18, 2015

  10. I got 7 correct.

    by Don — March 18, 2015

  11. 10 right. Got #7 wrong, and it’s bugging me. I remember when annuity companies failed a long time ago, so they still make me nervous. (I admit I don’t know if they’re insured at this point.) I also remember runaway inflation in the early 80’s, so choosing a fixed income carries significant risks if something like that were to happen again. 2-1/2 years or so from voluntary retirement, and can’t wait.

    by Sharon — March 18, 2015

  12. 12/12 and 51 years old

    by Kevin — March 18, 2015

  13. Eight correct here. I also got #7 wrong. I don’t trust annuities; many are profit vehicles for insurance companies and from what I’ve read difficult to get out of without all kinds of penalties. I am retired and I’ve done very well with blue chip stocks paying between 2.5% and 4% dividends and a mixture of conservative and moderate allocation mutual funds. I lean toward equities rather than bonds, considering about 30% in bonds quite right for me.

    by David Martini — March 19, 2015

  14. Just retired and it can be unsettling. I think a Financial Plan is the most important piece of your retirement preparation. It should reveal your suggested asset allocation at that point, your spending maximum and which SS strategy would be most successful etc. Who knows how long you are going to live and what life has in store for you but at least you did your homework.

    by Frank — March 19, 2015

  15. 9 correct but I disagree with #3. Converting to a Roth IRA involves paying out of pocket to do so. A low income year and you’re using savings to convert an IRA? INSANE. Leave the IRA alone and save your money.

    by Jay Smith — March 19, 2015

  16. Jay: We were hoping someone with a financial background would pipe up on your issue with question 9. But we don’t want to leave the issue as it is since we think you are missing the essential point here. If there is someone with professional financial credentials who would care to weigh in, please do.

    Here is the general as we understand it as a lay person. When you take money out of a 401(k) or IRA it becomes taxable as ordinary income. That happens if you decide to convert that money to a Roth IRA as well. So take the example of taking $50,000 out of your 401(k) and converting it to a Roth. In the year that you make the conversion all $50,000 becomes taxable income. Lets say that you also had $50,000 in other income that year. Now your income is $100,000 (assuming no other deductions), so your marginal rate will go up. In 2014 you will pay $10,162.50 and 25% over $73,800 in federal income taxes in that situation. But take another example, where you had only $10,000 in other income that year. Now your income is $60,000, and your marginal rate would be lower – 10% on the first $18,150 and 15% over that. In other words, if you have a bad financial year and intend to convert to a Roth, it might be the best time to do it.

    by Editor — March 20, 2015

RSS feed for comments on this post. TrackBack URL

Leave a comment