Login | November 22, 2024
Retirement quiz can prompt insights into your situation
JULIE JASON
The Discerning Investor
Published: November 21, 2024
Given that I'm always thinking about retirement investing for people of all ages, I'm always eager to share tools and resources that can be helpful if you are retired or hoping to retire securely someday in the future.
A key to retirement success is prudent decision-making, which, without exception, flows from a solid base of knowledge and experience. When test-takers on retirement financial literacy score low, that's a sign of more work to be done.
When we've talked about this subject in the past, I've mentioned a particular test conducted by the American College of Financial Services called the Retirement Income Financial Literacy Quiz. As reported in the 2023 Retirement Income Literacy Study, the quiz was administered to 3,765 Americans ages 50 to 74. The findings? Scores were scary low: The average retirement income literacy score was 31% -- well below a passing grade.
I encourage you to take 15 minutes to take the quiz to test your own knowledge. Go to: tinyurl.com/yeyrk3yj.
The test covers several important retirement categories, including retirement income, Social Security, annuities, life insurance, long-term care, Medicare and taxes.
To pique your interest, I'll give you some sample questions here. To further encourage you, you'll find the answers on the website only after you take the test. There are 38 questions overall. Taking the test will help you "assess your retirement planning knowledge and begin the journey towards retirement readiness." Here we go:
-- Choose the response below that best completes this statement: If you had a well-diversified portfolio of 50% stocks and 50% bonds that was worth $100,000 at retirement, based on historical returns in the United States, the most you can afford to withdraw each year is about (answer) plus inflation each year to have a 95% chance that your assets will last for 30 years: A) $2,000; B) $4,000; C) $6,000; or D) $8,000.
-- Choose the response below that best completes this statement: To maximize the safe withdrawal rate from a portfolio over a 30-year retirement period, it is best to hold (answer) in equities throughout retirement: A) 0-10%; B) 25-35%; C) 50-60%; D) 90-100%.
-- Which one of the following is true about cash value life insurance? A) The cash value portion will accumulate tax deferred; B) You typically cannot borrow from the cash value; C) The policy will expire after a specified period of time; D) The policy will typically cost less than a term insurance policy.
-- Nationally, who pays for the majority of long-term care expenses provided in nursing homes? A) Medicare; B) Private payment by individuals; C) Medicaid; D) Insurance purchased by individuals.
-- A deferred variable annuity with guaranteed lifetime withdrawal benefits (answer): A) Ensures that the investment account will not lose value; B) Only offers investment alternatives with fixed returns; C) Pays guaranteed income that varies based on market performance; D) Can pay income even if the investment account goes to zero.
Other topics include the age that required distributions need to be made from an IRA; when a reverse mortgage with a lump sum payment needs to be repaid; what medical expenses are covered by traditional Medicare; what is a PE ratio; and claiming Social Security benefits.
Taking this survey can give you an idea of areas where your knowledge needs to be increased. The more you understand, the more you can prepare for retirement.
You'll find the correct answers at the end of the quiz (wish I could give them to you here ...) Your results can help you decide what topics might require professional assistance. The ultimate goal is not your score on the quiz -- it's what you learn from it today that can help you with tomorrow's decisions.
And a final note: If you are interested in attending one of my virtual or in-person presentations, email me to be placed on an invitation list. Some presentations are also listed on my website (www.juliejason.com).
Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, "The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.
COPYRIGHT 2024 Julie Jason, DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION, 1130 Walnut St., Kansas City, MO 64106; 816-581-7500.