Tom Murphy
RedwoodAge.com
We all make plans. We plan vacations. We plan to go to the movies. We plan to see mom next weekend.
Most of us "plan to retire," but not enough of us have figured out how we're going to do that. And that's dangerous. Developing a plan doesn't take much time, but it can take many years to make it work.
The time to start is long before retirement. People who start planning for retirement in their 20s are usually the best-prepared for retirement.
Sixty percent of the baby boomers - more than 45 million people - have yet to develop a retirement plan. Many think they'll get by on Social Security, a pension, their savings, the equity in their homes, or by working longer.
Most would be wrong. While a combination of those things may provide enough for retirement, most people don't have enough assets to maintain their current standard of living after retirement.
We live in uncertain economic times, and your nest egg may not be as safe as you think.
Consider this: the average 401k contains about $58,000, but the average nursing home costs about $75,000 a year.
And while many people have paid off their mortgages, they'll still have to pay property taxes and maintenance for perhaps 30 years while inflation drives up the cost of food, fuel and other expenses. And they may be over-dependent on the value of their homes.
Medical costs rise faster than anything, but most workers don't buy long-term care insurance as they get into the years when they might be subject to heart problems or other long-term disabilities.
How well are you preparing for retirement? In truth, only an independent financial professional looking at your particular circumstances can help you answer that question. But here's a quick, 10-question quiz to help you get started.
Simply answer the questions below, scoring yourself as you go. We're not collecting this information; it's just for your benefit. Just print out this story and fill in the blanks.
If you don't know the answers to any questions, give yourself a minus-3. You'll find out how you did after the test. Don't cheat.
|
Start
by giving yourself some points according to your age. Then answer the 10
questions, keeping a running point total as you go. |
TEST |
YOUR |
| Under 40 40-44 45-50 51-55 Over 55 |
50 |
|
|
1.
I plan to retire at age: |
|
|
|
Under 60 |
-10 |
|
|
2.
When I retire, I'll get this much each month from Social Security, a
pension or other retirement plans: |
|
|
| 0-$500 $501-1,500 $1,501-$2,500 $2,501-3,500 Over $3,500 |
-3 |
|
| 3. My total annual household income is: | ||
| Under
$50,000 $50,001-100,000 $100,001-150,000 $150,001-200,000 Over $200,000 |
-3 |
|
| 4. Total household savings: | ||
| Under
$50,000 $50,001-100,000 $100,001-$200,000 $200,001-300,000 Over $300,000 |
-3 |
|
| 5. My total investments are worth: | ||
| Under
$100,000 $100,001-200,000 $200,001-$300,000 $300,001-$400,000 Over $400,000 |
-3 |
|
| 6. My total debt, including mortgage: | ||
| Over
$350,000 $200,001-350,000 $100,001-200,000 $50,001-100,000 Under $50,000 |
-3 |
|
| 7. Equity saved in my home, if any: | ||
| $0-100,000 $100,001-200,000 $200,001-300,000 $300,001-400,000 Over $400,000 |
-3 |
|
| 8. In coming years, I'll probably spend this much to help aging parents or my kids: | ||
| Over
$200,000 $150,001-$200,000 $100,001-$150,000 $50,001-$100,000 $0 - 50,000 |
-3 |
|
| 9. I've saved this much in my retirement accounts: | ||
| $0-50,000 $50,001-100,000 $100,001-150,000 $150,001-$200,000 Over $200,000 |
-3 |
|
| 10. I've met with an independent financial professional and have a retirement plan. | ||
| Yes No |
+5 |
|
How did you do?
Under 20 points: Get professional help now! Your future is at risk.
20-30 points: You need to work on improving your long-term outlook.
31-40 points: Not bad. But with help, you can do much better.
41-50 points: You're on the right track, but keep looking for ways to do
better.
Over 50 points: Congratulations! You're likely on your way to a good
retirement.
Please note, this test - like retirement planning itself - gets much harder as you get older. So if you're still a long way from retirement, keep in mind that you'll have to be in a much better financial position to get the same score in five or 10 years. Now's the time to work on that.
Again, no quick test on the Internet is going to assure you a relaxed retirement. Only you can do that with the help of an independent financial advisor. So if you haven't sat down with a retirement planner yet, today would be a good day to make plans to do that. You can get a reference from a retirement nonprofit in your area.
