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
Comments on "How Ready Are You for Retirement – A Quiz"
Caps says:
I scored 9 correct.
ella says:
Caps, You go, girl!
Frank says:
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)
Linda says:
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.
SharonA says:
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.
Susan says:
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.
Tonya says:
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.
Joanne says:
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!
Kathleen says:
I only missed 2 and I will be retiring next year. I am so ready!
Don says:
I got 7 correct.
Sharon says:
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.
Kevin says:
12/12 and 51 years old
David Martini says:
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.
Frank says:
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.
Jay Smith says:
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.
Editor says:
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.