It takes solid planning and fiscal discipline during your working years to enjoy a financially comfortable retirement. But how can you properly plan if you don't really understand how to manage your money to maximize retirement benefits? Even if you pay a financial advisor to assist, in the end, the decisions are still yours to make.
Why not take a few minutes to test your understanding of retirement finances by taking an online retirement income literacy quiz provided by the American College of Financial Services (affiliated with New York Life)? Their Center for Retirement Income offers two multiple-choice quizzes to assess your retirement income literacy – a comprehensive 38-question quiz and a simplified six-question version for those who have limited time or want only a quick refresher.
If you don't feel confident taking either quiz cold, we offer some study tips. We won't give you full questions or answers to the quiz, but here are a few topics to review.
Social Security – Even with suitable retirement investments, Social Security benefits will be an important part of most people's retirement strategy. Be ready for questions about the Social Security program and strategies to maximize your benefits.
Medical Concerns – Medical issues are likely to be one of your largest cash drains in retirement, and the quiz contains plenty of appropriate questions on the topics. Questions will test your basic knowledge of Medicare and Medicaid coverage, long-term care concerns, typical medical costs, and related insurance coverage.
Investments – Other questions cover basic finance and investment topics and terms. Do you understand various investment strategies, and how each are affected by inflation? Do you know the difference between bond prices and bond yields? How much do you know about mutual funds? Social Security alone will not get most people where they want to be in retirement, so it's important to understand investment principles in order to meet your retirement goals.
Reverse Mortgages – Expect a question that tests your understanding of reverse mortgages, since reverse mortgages are a popular way for seniors to use the equity in their homes to fund a portion of their retirement. The American College of Financial Services website includes a separate quiz on reverse mortgage literacy if you are interested in a more in-depth challenge.
Life Insurance – Expect questions on topics typically related to life insurance such as annuities, cash-value life insurance, and death benefits, as well as the related tax ramifications. (Given the backing of New York Life, this shouldn't be a surprise.)
Some questions may give the impression that complex math is involved, but they are more a test of your estimating skills and your knowledge of basic rules of thumb. If you are a frequent reader of financial articles, you probably know the answers. If not, you have a decent chance of guessing the right answers through common sense.
A quiz on retirement income literacy may not be the most entertaining way to spend part of your limited leisure time, but it might give you the best return on your time investment (pun intended). Even if you are well-versed in finances, a refresher course is always worthwhile. You may learn a few things that you didn't know – and may make some corrections to your finances that lead to a more secure retirement.
Remember that it is never too late to improve your retirement knowledge, which will in turn help your financial situation. "Jim Rohn, a business philosopher, was famous for saying that formal education will make you a living and self-education will make you a fortune," reminds National Financial Educators Founder and Chief Education Officer Adam Carroll. Educate yourself by browsing through retirement articles on MoneyTips. Then, let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle.