Retirement expectations quiz

How confident are you in your retirement plans? Take this retirement expectations quiz to see if you can spot potential setbacks to your retirement savings plan that could interfere with your future financial security. 

Tags: Retirement, Investing, Investments, Savings, Healthcare
Published: March 31, 2022

Retirement is possibly the most important long-term financial goal of your lifetime. The more you check your retirement expectations and understand the strategies and options available to you when planning your retirement, the better prepared you’ll be.

Test your knowledge to see if your retirement savings plan is setting you up for future financial security.

 

Retirement expectations quiz

Answer A, B, C or D

 

1. According to the Social Security Administration, what percentage of your income is Social Security designed to replace in retirement?

A. 100%

B. 75%

C. 50%

D. 40%

 

2. As a rule of thumb, at least what percentage of your gross (pre-tax) income should you try to set aside for retirement savings on a regular basis?

A. 1%

B. 3%

C. 5%

D. 10%

 

3. Which of these steps is likely to have the most favorable impact on trying to meet your retirement goals?

A. Waiting for a bonus or inheritance to help fund retirement

B. Saving money in accounts where all earnings are subject to current tax

C. Starting to invest as early as possible to benefit from compound interest

D. Delaying saving to focus on other financial priorities, like paying down debt

 

4. Which of these types of financial accounts should you consider using to save for retirement?

A. A workplace savings plan (such as a 401(k) or 403(b) plan)

B. An IRA

C. Annuities

D. All of the above

 

5. What healthcare cost does Medicare NOT cover in retirement?

A. Long-term care

B. Preventive screenings

C. Medical equipment like wheelchairs and walkers

D. Hospital stays

 

6. If you’re younger than 59½ and need cash to meet an immediate need, which of these retirement savings sources should you avoid tapping?

A. Liquid savings accounts

B. Your 401(k) or IRA accounts

C. A home equity loan or line of credit

 

7. Which of these retirement savings strategies should you pursue in your final years of employment?

A. Begin to adjust your portfolio to protect it from the impact of market downturns

B. Move all your investments into stocks and other risky assets

C. Begin to draw down your retirement savings

D. Stop setting aside money in your workplace savings plans and IRAs

 

Retirement expectations quiz: Answers

1. D. 40%

2. D. 10% 1

3. C. Starting to invest as early as possible to benefit from compound interest

4. D. All of the above

5. A. Long-term care

6. B. Your 401(k) or IRA

7. A. Begin to adjust your portfolio to protect it from the impact of market downturns

 

How did you do? If you didn’t answer correctly as often as you would like, the tips below can help as you think about recalibrating your retirement planning.

 

Don’t plan to rely on Social Security benefits alone in retirement

Social Security can provide a regular stream of income in retirement, but if you’re like most people, it can’t fulfill all your financial needs. Average Social Security benefits are $1,657 per month, so you’ll want to be responsible with your financial well-being and diversify your streams of income.2

 

Invest early to take advantage of compounding interest in retirement

The earlier you invest, the sooner you’ll start earning income through interest. To meet your retirement savings goals, set aside as much as you can as soon as you can, ideally at least 10-12% of your gross income.1

 

Put retirement savings into tax-advantaged savings accounts

Workplace savings plans such as 401(k)s and 403(b)s allow you to put your money to work before it’s taxed, and earnings in these accounts grow on a tax-deferred basis. Your employer may even match your contributions, up to a certain amount.

Individual retirement accounts (IRAs) offer several options depending on your income. Contributions can be pre-tax or after-tax, earnings are tax-deferred, and Roth IRAs offer the opportunity for tax-free distributions in retirement.

Plus, once you reach age 50, you can take advantage of catch-up contributions to your workplace retirement plan or individual retirement account (IRA) to boost your savings even more. Just don’t forget to rollover your 401(k) if you leave one job for another.

 

Make a retirement healthcare plan

Most adults over the age of 65 are required to enroll in Medicare, so you should explore when and where Medicare can be used as coverage in the event of a medical issue. However, services such as long-term care are not covered under Medicare.

Consider setting money aside in a Health Savings Account (HSA) to help you cover Medicare and other insurance premiums. Additionally, long-term care insurance can help you cover costs associated with long-term care in your home, assisted living or a nursing home.

 

Don’t touch your retirement accounts

Until you are officially retired, it’s best to avoid withdrawing any funds from your retirement accounts. You’re much better off using liquid assets, such as cash or funds from a money market account, to cover emergencies or urgent needs.

 

Prepare your portfolio for retirement

As you close in on your retirement date, you’ll want to consider adjusting your retirement portfolio to protect against unexpected but potentially dramatic downturns in the market. Diversifying your portfolio with assets from low or no risk of loss to assets that have the potential to generate growth can help position you against possible negative moves in the market, as well as offset inflation.

 

Get more information on saving, preparing for and living in retirement in our retirement planning toolkit.

 

1 How much should I save for retirement?, U.S. Bank Wealth Management.
2 Social Security Fact Sheet 2022, ssa.gov.