February 20, 2019 — By now you have hopefully taken our online “Retirement Preparation Quiz” and seen your score. If you haven’t, you can take it here. Please realize that the original passing score (70%) was chosen subjectively – your opinion of the state of your retirement preparation is undoubtedly better than ours. We hope that by presenting the questions and reasons for the correct answers you can increase your understanding of retirement preparation. Note that for most of the questions we have provided a link to an article on that topic so you can explore it in greater detail.
Notes about the results
Almost 1100 people had taken the quiz as of Feb. 26. The average score for everyone taking the test was about 69%. That prompted us to lower the “passing” grade to 60% (from 70%), since many of the factual questions were difficult. In addition, for some of the questions that had more than 2 choices (e.g.; yes, no, somewhat) more than one answer might be considered acceptable. We have posted the percentage (%) of people who got each question right next the correct answers.
The questions that were most often missed were #3 and #8. Number 3 asked which of three investments had the best guarantee of income. Only 39% selected the “correct” answer, annuity, probably because people didn’t realize the key word was “income”, and assumed we meant “return”. Number 8, age of breakeven for delaying SS until age 70, was answered correctly by only 34%. We can see why, because not all experts agree on the consensus answer of 81-82. All of the questions we asked about progress on preparation and/or discussion with spouse/family members had strong results, usually 80% or better. That is good news, indicating that there is a lot of planning and discussing going on. Somewhat distressing were the responses to questions 9 and 10 on wills and health care directives. Almost one third of quiz takers do not have one or the other of those, so it is time for them to get busy on those important tasks. Only about half (53%) have spent time thinking about “late” retirement. The questions with the highest % of correct answers were those that had to do with planning on what type of community or home they want to live in – 90% or more said they had.
What is the average life expectancy of a woman and a man aged 65 years?
90 and 86
87 (woman) and 84 (man) – Correct (64%)
80 and 77
Comment: If you manage to live to the age of 65 you still have a long way to go – on average! This is a good thing to know when you consider when to take Social Security and budget your retirement – outliving your money is not pleasant. (Note: We added the age of a woman to this question following a Member suggestion).
Have you calculated how much money you will have in retirement, including a budget that matches income against expenses?
Yes –Correct (81%)
Comment: This might be the most important task you have in retirement – you have to know where you stand. See Module 1: Retiring on a Lot Less Than $1 million.
Which of these investment options usually provides the best guarantee of future income?
A good quality annuity – Correct (39%)
Individual growth stocks (5%)
A diversified mutual fund (56%
Comment: A good annuity should deliver a promised amount without the risk of stocks or mutual funds. It might not provide the highest return, but does have the best guarantee of income (that was the key word in the question).
Which of these strategies is the LEAST effective in helping you have enough money for a comfortable retirement:
Saving 3% more in each of the 5 years preceding retirement – Correct (57%)
Working 2 years longer
Deferring Social Security 2 years
Comment: Working longer or deferring Social Security produces more money for retirement than the 3% savings option.
Do you have a qualified financial advisor, and/or have you spent serious time doing your own financial research?
Yes – Correct (79%)
Comment:Someone has to be in charge of your financial planning. It cannot be left to chance. Unfortunately the financial literacy of most Americans is low; people tend to think they know more than they actually do. Take this Financial Literacy Quiz. Also, see this article: “Should You Hire a Financial Advisor, or Do It Yourself“.
How does the Social Security Administration calculate your retirement benefit?
Social Security calculates your average indexed monthly earnings during the 20 years in which you earned the most
Social Security calculates your average indexed monthly earnings during the 25 years in which you earned the most.
Social Security calculates your average indexed monthly earnings during the 30 years in which you earned the most.
Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. – Correct (39%)
Comment: The more years you work the more chances you have to increase your benefits, because any year you didn’t work counts as a zero. Take our “Social Security IQ Test” to find out what you actually do know about this important benefit. Once you take it you can see the answers, which might be very helpful.
As the surviving spouse of someone who qualified for Social Security benefits, what are your benefits?
50% of the spouse’s benefit, regardless of your age
75% of your spouse’s benefit upon his or her death, assuming you are at your Full Retirement Age
100% of your spouse’s retirement benefit upon his/her death, assuming you are at full retirement age – Correct (52%
Comment: One big reason for delaying Social Security is the potential higher benefit your spouse will get after you are gone.
Social Security. If you wait to take Social Security until age 70 instead of taking it earlier at your FRA (Full Retirement Age), what is your estimate for the age when your decision to wait will break even vs. taking it earlier? (Full Retirement Age is 67 for people born 1960 or later)
82 – Correct (34%)
Comment: Different experts calculate the breakeven point differently, but the consensus seems to be that if you live beyond 81 or 82 it will have paid for you to delay.
Do you have a will, and have you looked at or revised it in the last 5 years?
Yes – Correct (70%)
Comment: Pretty obvious, don’t saddle your relatives with the problems that come from dying intestate. See “Don’t Die Without a Will – Please!“
Do you have a living will, Advanced Health Care Directive, or durable power of attorney?
Yes – Correct (69%)
Comment: Give your relatives a break, leave them with clear instructions so they don’t have to make tough decisions with no guidance from you.
Have you and your significant other discussed what part of the country you want to live in, considering climate, things you like to do, etc. If single, have you discussed it with friends/family?
Yes – Correct (81%)
Comment: If you haven’t done this yet, get started. If there is a conflict, you will have time to work it out. “What to Do If You and Your Partner Have a Different Retirement Vision“.
Have you considered if living near your children, grandchildren, relatives and friends is important to you?
Yes – Correct (88%)
Comment: This is one of many topics you and your significant other need to discuss. Remember that you children might move too! See “7 Questions to Ask Before You Pick a Place to Retire“.
Have you thought about where you want to live in LATE retirement (e.g.; when you are in your 80’s-90’s), if you are lucky enough to live that long?
Yes – Correct (53%
Comment: Forward planning is important. If you live long enough, you will need care and it is good to think about that early. Many experts recommend retiring to a place that has communities that will work as you age. See “Where Will You Be When You Are 80“.
Hobbies and/or work. Do you have a solid idea of the kinds of things that will keep you busy every day, 2 years after your retirement?
Yes – Correct (71%)
Not that much
Comment: People who stay busy and have a purpose are usually happier than those who don’t. Planning to clean out the garage and take a few trips doth not make a plan! See “10 ideas: What Will You Do When You Retire“.
How much thought have you given to how you will make new friends and keep up your social life once you retire?
A great deal – Correct (41%)
A little bit (54%
Too busy with work for that (5%)
Comment: All kinds of studies see the problems that come with social isolation in retirement. Men in particular have trouble making new friends – you will need a plan and to make an effort. See “The Greatest Health Hazard Men Face in Retirement“.
Will you continue to work after retirement, or have some other activity to keep you busy?
Yes – Correct 76%)
Comment: Important to at least consider this, even if the answer is no. Part time, volunteer work are both possibilities to think about. See “Survey Results: Working in Retirement“.
Type of community. Have you discussed what kind of community you want to live in (55+, active adult, all ages, CCRC, home in regular neighborhood}?
Yes – Correct (91%)
Comment: There are many retirement living options. One or more of them will be right for you – but you need to understand what they are. Get started now visiting different kinds that interest you. See “What Type of Retirement Community is Right for You?“
Have you thought about the type of home you might want to retire to, and how you can make sure it is age appropriate (universal design)?
Yes – Correct (90%)
What is universal design?
Comment: As you age your physical abilities will decline. Better to think about that before you buy. Universal design is the design of buildings, products or environments to make them accessible to all people, regardless of age, disability, or other factors. See “Make Your Retirement Easier with These Simple Steps“.
Field trips. Have you visited any other parts of the country, communities, etc. where you might be interested in moving?
Yes – Correct (51%)
A few (31%)
Not interested in moving (4%)
Comment: Take advantage of vacations and business travel to check out different areas. See “Looking for an Active Adult Community: Tips from the Pros“.
What does Medicare Part B typically cover?
Outpatient and preventive care- Correct (69%)
Comment: Medicare is too important not to know how to sign up and what the best plan is for you. The choices are complex, so they require some thought. That includes supplemental insurance. See “So You’re Turning 65: Your Guide to Medicare 101“. (Note: if you took an earlier version of the quiz the question you were asked was different. We revised it to provide a better test of Medicare knowledge).
For further Reading: