RETIREMENT IQ Test

WHAT ARE YOU SAVING FOR TODAY?

What you save today will play a major part in generating the income you will need for your future retirement. According to the 2023 Retirement Income Literacy Survey, adults aged from 50-75 only scored 31% - out of a possible 100%.^*

Here are some of the questions included in the survey. Test yourself and see how well you do:

1. WHICH OF THE FOLLOWING STRATEGIES IS LEAST LIKELY TO IMPROVE RETIREMENT SECURITY?

(a) Saving an additional 3% of salary in the five years prior to retirement

(b) Deferring Social Security benefits for two years longer than originally planned

(c) Working for two years past the planned retirement date

2. A 65-YEAR-OLD MAN HAS AN AVERAGE LIFE EXPECTANCY OF APPROXIMATELY AN ADDITIONAL:

(a) 10 years

(b) 15 years

(c) 20 years

(d) 25 years

3. of the following options, the best way to protect against inflation is to have a…

(a) Diversified portfolio of stocks

(b) Diversified portfolio of traditional bonds

(c) Diversified portfolio of CDs (certificates of deposit)

4. ACCORDING TO THE SOCIAL SECURITY ADMINISTRATION, AROUND 2034 THEY WILL ONLY HAVE FUNDS TO PAY FOR APPROXIMATELY ___ OF PROMISED BENEFITS.

(a) 0%

(b) 25%

(c) 50%

(d) 75%

5. WHAT IS THE PROPORTION OF THE POPULATION THAT IS GOING TO NEED ASSISTANCE WITH ACTIVITIES OF DAILY LIVING (NEED LONG-TERM CARE) AT SOME POINT?

(a) 10%

(b) 25%

(c) 50%

(d) 70%

6. HISTORICALLY, WHICH ONE OF THE FOLLOWING GENERATES THE HIGHEST RETURNS OVER A LONG TIME PERIOD?

(a) Small company stock funds

(b) Large company stock funds

(c) Dividend-paying stock funds

(d) High-yield bond funds

7. required MINIMUM DISTRIBUTIONs FROM AN IRA GENERALLY MUST BE MADE EVERY YEAR ONCE AN INDIVIDUAL HAS ATTAINED AGE …

(a) 55

(b) 59½

(c) 65

(d) 70½

(e) 73

8. WHICH OF THE FOLLOWING LONG-TERM BONDS TYPICALLY HAS THE HIGHEST YIELD?

(a) AAA-rated corporate bonds

(b) B-rated corporate bonds

(c) treasury bond

9. TRUE OR FALSE: BUYING A SINGLE COMPANY’S STOCK USUALLY PROVIDES A SAFER RETURN THAN A STOCK MUTUAL FUND.

(a) True

(b) False

10. IF 100% OF A MUTUAL FUND’S ASSETS ARE INVESTED IN LONG-TERM BONDS AND THE INVESTMENT CLIMATE CHANGES SO THAT INTEREST RATES RISE SIGNIFICANTLY, THEN THE VALUE OF THE MUTUAL FUND SHARES …

(a) Increases significantly

(b) Decreases significantly

(c) Will not change at all

(d) May rise or fall depending on the type of bond

QUIZ ANSWERS:

1. (a) Out of the options, saving an additional 3% of salary in the five years prior to retirement is least likely to improve one’s retirement security.
2. (c) On average, a 65-year-old man will live another 20 years. And many will live even longer.
3. (a) Based on the options provided in the survey answer A is the correct one, but we here at Edelman Financial Engines always recommend a diversified retirement strategy that goes beyond just stocks.
4. (d) 75%, but that assumes that Congress does nothing in the meantime.
5. (d) 70%. More people are living longer than ever before. That means the chances are pretty good you may need LTC at some point.
6. (a) Smaller companies generally have higher growth potential, but they also tend to be more risky and more volatile.
7. (d) 70½ or (e) 73. You generally have to start taking withdrawals from your traditional IRA, SEP-IRA, SIMPLE IRA or retirement plan account when you turn 73 (70½ if you reached 70½ before Jan. 1, 2020).
8. (b) B-rated corporate bonds. The others are rated higher and have higher quality and lower risk, but not the highest yield.
9. False. A basket of stocks usually takes less risk than a single stock, because if one goes down, you still have many others in your portfolio. It’s like having 12 eggs in 12 baskets instead of all 12 in one basket.
10. (b) It will likely decrease significantly. Bond values and interest rates are inversely related: When one goes up, the other typically goes down.

How did you do? Don’t be discouraged if you missed a few questions. You are not alone. But you do have resources you can rely on to help you with your retirement income strategies.

If you have questions, why not connect with an experienced professional at Edelman Financial Engines? Our financial advisors can help answer your questions and help you with your retirement income planning.

^*Source: The American College of Financial Services. 2023 Retirement Income Literacy Survey. Retrieved May 22, 2024, from https://www.theamericancollege.edu/knowledge-hub/retirement-income-literacy-study