Excerpts from "The Great American Retirement Quiz", The Wall Street Journal, Monday, December 20, 2004, Section R
- If you retire at 65, what percentage of your life can you expect to spend in retirement?
a. 16% b. 18% c. 20% d. 22%
Answer: d. At age 65 Americans average an additional 18 years of life. However remember this is an average and that means 1/2 of us will live past this 83 years of age. There is a risk that you will outlive your retirement savings if your underestimate your life expectancy.
- What is considered a prudent rate of withdrawal when first tapping retirement savings?
a. 4% b. 6% c. 8% d. 10%
Answer: a. Research has indicated that a safe rate of withdrawal - so as not to outlive one's nest egg is about 4% a year. For example if you have $500,000 at retirement you could withdraw $20,000 the first year and increase that withdrawal each year after by the rate of inflation.
- What percentage of households in the U.S. have pension coverage that relies solely on a defined-contribution plan, such as a 401(k)?
a. 38% b. 48% c. 58% d. 68%
Answer: c. In 2001, more than half of all households were dependent solely on the defined-contribution plans for pension coverage, up from 37% in 1992
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What percentage of current workers say they expect to work for pay in some capacity after they retire-and what percentage of current retirees say they have, in fact, worked for pay at any given point in retirement?
Current Workers Current Retirees a. 38% a. 32% b. 48% b. 42% c. 58% c. 52% d. 68% d. 62%
Answers: d. (current workers) and a. (current retirees) Although two-thirds or more of current workers regularly tell researchers that they plan to earn a paycheck in later life, only about one-third of current retirees actually have done so. The point here is that it is unlikely that all of the workers who would like to work in retirement will be able to do so.
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5) At what age do Americans qualify for full Social Security benefits?
a. 65 b. 66 c. 67 d. varies by year of birth
Answer: d. Uncle Sam is gradually increasing the age at which individuals become eligible for full Social Security benefits.
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6) True or false: If you begin collecting benefits from Social Security at age 62, a portion of those benefits could be withheld if you have earned income.
Answer: True. Between ages 62 and the year in which a worker reaches his or her full retirement age, Social Security benefits currently are reduced $1 for every $2 earned over $11,640. (That cap increases slightly each year, and the rules change in the year an individual reaches full retirement age.) After full retirement age, there is no reduction in benefits tied to earnings.
