How should you plan

It has been awhile since we posted anything on our blog. We have been working hard though and looking for topics we felt would be beneficial. With the economy in its current state we debated a number of topics; we decided to address retirement. While reading Money Magazine we came across a quiz, divided into age groups, that helps address retirement needs and judge were you might be as far as retirement is concerned. Remember to check back with our blog, as we will be covering fire protection sprinklers in single-family homes very soon.

Age 35 to 44

1. How often do you carry a credit card balance month to month?
1. Once or twice a year, around the holidays
2. Most months
3. Always
4. Never
2. How do you feel about your job?
1. I’m happy with my job and salary
2. Oy – I’m overworked and underpaid
3. I don’t love my job, but it pays well
4. Expect for the money part, it’s great
5. Ouch. When I find a job I’ll let you know
3. How do you manage your cash flow?
1. I pay my bills on time and usually balance my checking account
2. I have a budget and track my spending
3. Money comes in; money goes out
4. Have you thought much about retirement?
1. Are you kidding? I can barely think beyond next months car payment
2. Enough to know I’d like to retire at 65
3. Yes, I’m saving so maybe I can even retire early
5. What percentage of your pay are you saving in tax-advantages accounts such as 401(k)s and IRAs?
1. Zero
2. 1% to 5%
3. 6% to 10%
4. More then 10%
6. How did you pick your investment in those accounts?
1. I’m pretty sure someone did it for me
2. I researched stock and bond funds and picked the mix that’s right for me
3. I chose a target-date fund based on my age
4. I follow Uncle Bernie’s advice: He made a killing in gold stocks last year
5. What accounts
7. How much money have you saved for retirement so far?
1. Less then half my annual pretax income
2. Between half and twice my income
3. More than twice my income
4. Um… I’d have to check

Your Score: Add up the numbers next to your answers

1. A(3) B(0) C(0) D(7)
2. A(3) B(0) C(2) D(2) E(0)
3. A(4) B(6) C(0)
4. A(0) B(1) C(3)
5. A(0) B(3) C(5) D(7)
6. A(0) B(5) C(3) D (0) E (0)
7. A(0) B(3) C(5) D(0)

What your score means?

0 to 12: It’s time to get serious. For help to go cnnmoney.com/retirement

13 to 24: You’re on your way, but need to kick up your planning a notch

25 to 36: You’re doing great. But don’t forget to enjoy today too.

The Logic:

1. Consumer debt poses the biggest threat to building wealth. A 35 year old must put $300 toward debt each moth rather then investing it.
2. Research shows one of the best things you can do for your retirement is find a job you love; you’ll want to do it longer. If it pays well too, it’s gravy
3. Experts say that how well you manage your cash flow is a key predictor in your ability to save
4. The earlier you start saving the better.
5. Stashing the max at this age gives you the biggest boost from tax deferred compounding
6. Learning the fundamentals of investing is crucial to maximizing your pot.
7. Goal: Twice your annual salary put away by age 44

Age 45 to 54

1. What percentage of pretax income goes towards you mortgage or rent?
1. Less then 15%
2. 15% to 30%
3. More then 30%
2. How are you paying for you kid’s college?
1. With money I’ve already saved, plus cash flow
2. With what I’ve saved in 529 accounts, if it costs more the kid will cover it
3. I’ll take out loans
4. My kids are going to win soccer scholarships
5. What kids?
3. Do you have a retirement plan?
1. What do you mean, plan?
2. No, but I used an online calculator a while ago and I seemed to be on track
3. Yes and I recheck my numbers every year or so
4. Does you employer offer an old-fashioned pension plan? (the kind where it contributes all the money)
1. Yes, plus a 401(k)
2. No, but it does offer a 401(k) and it matches the money I put in
3. No, but it does offer a 401(k) no match
4. I have neither a pension nor a 401(k)
5. What percentage of your income are you saving in retirement accounts each year?
1. Zero
2. 1% to 7%
3. 8% to 15%
4. More then 15%
6. How much money do you have set aside for retirement?
1. Less then my annual pretax income
2. Between one and three times my income
3. Between three and four times my income
4. More then four times my income
7. What’s your main goal for retirement?
1. To have more quality time for friends, family and activities
2. To embark on my next project maybe for pay, maybe not
3. To never darken the door of a workplace again

Your Score: Add up the numbers next to your answers

1. A(5) B(3) C(0)
2. A(3) B(5) C(0) D(0) E(5)
3. A(0) B(1) C(3)
4. A(6) B(4) C(3) D(0)
5. A(0) B(3) C(5) D(7)
6. A(0) B(3) C(5) D(7)
7. A(2) B(3) C(0)

What Your Score Means:

0 to 12: You’re in danger of derailment. Consider a sit down with a financial planner

13 to 34: You’re on track, but could use a boost. Save at least 15% of your earnings

25 to 36: Nice job. Keep doing what you’re doing!

The Logic:

1. Your biggest wealth hazard now: overspending on housing. Aim to put no more then 30% of pre-tax income toward any debt – mortgage included
2. Don’t delude yourself: Tuition, room and board at a private four-year college costs an average 23,930 a years, even after grants and tax bennies
3. A recent study shows that people who calculate how much they’ll need tend to save more
4. In 2006 the average pensioner over 59 collected 18,195 a year
5. Earnings peak now. So should savings
6. Goal by 54: More then four times your income saved
7. Your retirement will be more satisfying if you see it as a beginning not an end

Age 55 to 64:

1. When will you retire?
1. By 65, no problem
2. I’ll probably have to keep working at least part time after 65
3. When they wrench the office keys out of my cold, dad hands! (I need the money)
4. I’m in no hurry because I love what I do
2. Will you still carry a mortgage?
1. Yes
2. Not for very long
3. My mortgage will be paid off before I retire
4. I’m debt-free now
3. Where will you live?
1. In my current home. Too bad things are kind of expensive around here.
2. In my current home. The cost of living is low.
3. I’ll more to a smaller home in a cheaper area.
4. I’ll split time between my primary residence and my vacation home
4. How much money do you have set aside?
1. Less then four times my annual pre-tax income
2. Between four and six times my annual pre-tax income
3. Between six and eight times my income
4. More then eight times my income
5. How much annual income will you need?
1. Probably 76% to 85% my current income
2. I’ve worked out how much I can spend each year – It’s doable
3. I’m living off my project retirement income and saving the difference
4. There are too many variables to know yet
6. How will you handle health care coverage?
1. I’ll figure it out closet when I quit work
2. My company has a subsidized retiree health plan
3. I’ve researched Medigap policies to supplement Medicare
7. What’s your plan for long-term care?
1. Eat well, exercise and stay healthy
2. I bought a long term care policy
3. I’ve saved enough to cover a nursing home if I need one
4. I’ll move in with my kids if it comes to that

Your Score: Add up the numbers next to your answers

1. A(2) B(1) C(0) D(3)
2. A(0) B(4) C(5) D(6)
3. A(0) B(4) C(5) D(3)
4. A(0) B(3) C(5) D(7)
5. A(2) B(4) C(6) D(0)
6. A(0) B(6) C(4)
7. A(0) B(2) C(3) D(0)

What Your Score Means:

0 to 12: You will probably have to delay retirement and/or move to a cheaper place

13 to 24: You’re in decent shape but should ramp up savings and finalize plans

25 to 36: Look forward to a great retirement – you’re earned it!

The Logic:

1. If you can retire at 65 great, but if you delay and work on your accounts you’ll be more secure
2. Retirees who have paid off their homes can live on 10% to 15% less then those who haven’t
3. Downsizing to a lower cost area could make your nest egg last twice as long
4. You’ll need at least eight times your annual income set aside to afford your current lifestyle
5. Writing a realistic budget now will ensure you don’t outlive your stash
6. Projections show that a 65 year old couple will need $240,000 for future health costs (with Medicare)
7. An LTC policy isn’t a must if you’re prepared for the cost of assisted living