1. True. Research shows that people who know about personal finance are more likely to plan for retirement. For Anthony and Tonya, building their personal-finance skills might mean learning how to create a household budget, get the most for their shopping dollars, manage debt, and start a saving plan. Many people learn about saving for retirement from family members, friends, or co-workers. Others talk with financial professionals, attend seminars, or learn from magazine or newspaper articles. Your employer also might be a good source of information about saving for retirement. Return to questions 
2. True. Research shows that people who think about and plan for retirement save more than those who don't. One study found that “baby boomers” (people born between 1946 and 1964) who said they had done even a little planning had twice the wealth of those who did no planning. Yet, many American adults have done little or no planning for retirement. Some haven't tried to figure out how much money they'll need after they stop working. A written plan can be an important step in helping you save for retirement. The plan can be simple or detailed. Many experts suggest that the plan include goals and the steps you should take to achieve those goals. Return to questions 
3. c. About 70 percent or more. Many financial professionals suggest that people should plan to have 70 percent or more of their annual pre-retirement income each year in order to enjoy the same standard of living after they retire as they had when working. While this rule of thumb is helpful, everyone's situation is unique. For instance, if Anthony and Tonya make a total of $80,000 a year before taxes, they will need at least $56,000 a year after retirement to keep their same standard of living. However, lifestyle choices, a large mortgage or other debts, children's college payments, and big medical bills can affect how much money you may need after retirement. Return to questions 
4. c. Yes and no. Most middle-age people say they will not use their home equity (the difference between the value of the home and any remaining home debt or mortgage) to pay for daily living expenses in retirement, but if they live a long time, most end up doing just that. You can think of this equity as part of your total retirement savings if you plan to sell your house and move to a smaller home or to a less costly area. But, since you can't predict what your house will be worth in the future, you shouldn't count on using your equity to pay day-to-day bills after retirement. Return to questions 
5. c. More than 30 years. On average, Americans today are living longer than ever. The average life expectancy for a man reaching 65 in 2005 was just over 17 years and for a woman it was 20 years. That means, for example, that half of the men reaching age 65 will live another 17 years or more. And, some people will live into their 90s and even past 100, spending more time in retirement than their parents and grandparents did. In fact, today more than 5.5 million Americans are 85 or older. That means it may make sense to plan on saving enough to live an optimistic 30 years or more after age 65. Return to questions 
6. b. A retirement-saving plan offered by a company to its employees. A 401(k) retirement-saving plan lets employees save part of each paycheck for retirement and defer (put off) paying taxes on that saved money until the money is withdrawn at retirement. Some companies match employee contributions. This means putting an amount equal to part of the employee's contribution into the employee's 401(k) plan. Return to questions 
7. Yes. Because he signed up for his employer's 401(k) plan as a young man, Robert's savings began building right away. With a company 401(k) plan, employees can have part of their pay invested in a retirement fund. Usually, employees can choose the percent of pay that's deducted, up to a limit, and they often can choose where the money is invested. In addition, some employers add to their employees' savings by matching part of the money contributed. Private companies, like the one Robert works for, aren't the only employers to offer matching plans. Some government and nonprofit groups do as well. Check with your employer about what is available where you work. Return to questions 
8. Yes. Robert pays less in taxes because he invests in a 401(k) retirement plan. Money invested in a 401(k) plan is tax-deferred. In other words, the money is taken out of Robert's paycheck and invested before it is taxed. Robert won't pay taxes on the money until he withdraws it from the plan when he retires. That way, he can invest or use the money that would have gone toward taxes, rather than paying it as taxes now. Some 401(k) retirement plans are not tax-deferred and work in a different way—the money is taxed when it is earned, but not when it's withdrawn later. Check with your employer to find out more about your retirement plan and taxes. Return to questions 
9. True. If Robert's savings don't grow as expected, or if they shrink, there are still things he can do to save. Robert could start trying to save more money by cutting back on day-to-day spending. Working longer than he had planned will also help add to his retirement funds. It also means Robert won't be dipping into his retirement savings as early as intended either.
It's good to remember that it is normal for investments to go up or down a little. Sometimes, there is a larger drop in the stock market, and rarely there is a major slowing of the economy that can last months or longer. In the past, given time, most investments have come back and often do even better.
When people are nearing retirement and have most of their savings in investments like mutual funds or stocks, a major downturn means that a portion of their savings is lost. There might not be time for those savings to grow back again before the planned retirement date. That is one reason people should adjust the parts of their savings that are in stocks, mutual funds, bonds, and cash as they get closer to retirement. Return to questions 
10. True. Judy is not alone in finding it hard to save money for retirement. Research tells us that nearly three out of four Americans over age 50 feel they have saved too little for retirement and more than one out of three say they have saved nothing. Most people say they would save more if they could do it over again.
Like Judy, people who want to put aside money for retirement can find that having to pay today's expenses outweighs saving for the future. Planning and budgeting can help people begin to save or save more. As a starting place, Judy knows she will have Social Security, a Federal benefit program, but that shouldn't be her only source of money during her retirement years. Judy might also find that when her children are grown and on their own, she will have fewer expenses and saving will be easier, but she needs to start saving before then. The resources at www.mymoney.gov/category/topic1/planning-retirement/-retiring.html  may help her find ways to plan for retirement. Return to questions 
11. True. Women are likely to live longer than men, so it's important for them to plan financially for those extra years living in retirement. A woman also tends to earn less than a man over the course of their lifetime, so she may find it harder to grow her savings. Major life events like divorce, widowhood, and losing a job can change a person's financial health, more so for women than for men. It's especially important for women of all ages to learn about personal finance and saving and to save for their retirement years. Making a plan and setting aside even a small amount each week or month can help women like Judy grow their savings and get ready financially for their older years. Return to questions 
12. Yes. Judy can prepare better for her older years by learning as much as she can about personal finance. The Women's Institute for a Secure Retirement (WISER) offers information for women. The Department of Labor's publication called Women and Retirement Savings  also may be useful. Return to questions 
13. True. Health and financial resources are related in a number of different ways. Jorge and Maria's situation is not unique. Research has shown that, on average, people reporting excellent health had nearly three times the money as those who said they were in fair or poor health. Health affects people's ability to work and earn enough money to save. Major medical problems such as cancer, a heart condition, stroke, and diabetes can mean high out-of-pocket healthcare expenses (costs not covered by insurance), as well as loss of income. It can be hard to recover financially from major health problems. Return to questions 
14. True. Poor health is a reason people retire earlier than expected. In one study, a third of retirees age 55 to 59 said poor health was a very important factor in deciding to leave the workforce. Retiring early, whether for health or other reasons, can affect your financial health and ability to save enough for retirement. For instance, early retirement lowers the amount of Social Security benefits you can receive after you stop working. But, Social Security disability insurance, if you qualify for it, will not be reduced. Return to questions 
15. c. About 15 percent. One study of couples age 70 and older found that retirees spend about 15 percent of their income on out-of-pocket healthcare costs. These are costs not covered by Medicare (the Federal Government's health insurance program for people 65 and older). Medicare doesn't pay all your expenses, and it doesn't cover most long-term care costs. Premiums (the amount you pay for insurance) and other out-of-pocket healthcare costs for retirees will also probably go up in the future. This makes saving for retirement even more important. Return to questions 
16. Yes. Having long-term care insurance might have helped Maria and Jorge financially after Jorge's stroke. This type of insurance helps pay for care at home, assisted living, or nursing home care if needed. It helps protect people from using up their retirement savings or other resources to pay for care, but long-term care insurance must be purchased before it is needed. Return to questions 
17. No. It's not too late. Michael and Kamala can still take steps to save for their retirement years. If they're like many people in their 50s today, they expect to continue working full-time until at least age 66 or 67 for full Social Security benefits. That means Michael has about 13 more years and Kamala has about 14 more years to save before they retire. Also, one or both might choose to work past age 67. This would allow them to save more for retirement while earning money during those extra years of employment. Instead of using their savings for those years, they will be adding to it. If they are eligible for Social Security, that benefit will also go up the longer they continue to work.
To save more, Michael and Kamala also could look for ways to cut their monthly expenses. For instance, they might eat more meals at home rather than going out, buy clothing and household items on sale, and save some car expenses by driving less.
Increasing the amount Michael and Kamala contribute monthly to their retirement plans at work can also help. Investing that extra money, any matching dollars contributed by their employers, and their dividends (money earned on investments) will give Michael and Kamala more savings by the time they retire. Return to questions 
18. e. All of the above. In addition to their 401(k) plans, Michael and Kamala have several other options to save for retirement. For example, they might invest in mutual funds, bonds, IRAs (such as Roth IRAs), or certificates of deposit (CDs). Or they could set up an annuity, which is a contract between a person and an insurance company. Under an annuity contract, Michael and/or Kamala would make a lump-sum payment or series of payments over time. When they retire, the insurance company would pay Michael and/or Kamala either a regular fixed amount or an amount based on how much the investment earns. An annuity is usually tax-deferred, so Michael's and Kamala's earnings won't be taxed until they receive payments. Also, because they're in their 50s, Michael and Kamala might be able to save more by investing a limited amount of extra money, or “catch-up contributions,” in their retirement funds at the end of each year.
If you would like to learn more about investment choices, visit the Securities and Exchange Commission website at www.sec.gov/investor/pubs/investop.htm . A financial professional can also provide information and advice. Return to questions 
19. Yes. Michael and Kamala should look at how well their retirement investments are doing and consider making changes from time to time. In the past, many people had “defined-benefit” pension plans that paid a certain pension amount when they retired. Today, most retirement plans, such as 401(k)s, are “defined-contribution” plans. With these plans, investors like Michael and Kamala, not their employers, decide how much to contribute and how to invest the money within the plan options. This change means that participants must take an active role in deciding how to invest their money. As they get closer to retirement, they might consider moving some of their money from higher-risk investments like stocks to usually lower-risk investments like bonds. One way to do this automatically is to invest in a target-date mutual fund. Return to questions 
20. Yes. Daniel would benefit from making plans to save for retirement. Planning could help him to live the way he wants after retirement. His retirement goals might include traveling or doing volunteer work. Return to questions 
21. Yes. Taking part in his employer's retirement plan would give Daniel a way to start saving for retirement. Retirement plans offered by employers typically let employees choose what percent of their before-tax pay they want to contribute. His savings will accumulate and won't be taxed until he takes money out of his retirement account. Even if Daniel leaves his current job, he'll be able to keep the money he's invested. He might also be able to keep some of the matching contributions his employer has contributed to his retirement plan. His employer can tell him what percent is his to keep. Return to questions 
22. No. Social Security is only one part of a person's retirement plan. No one should depend solely on Social Security, just as no one should invest in only one stock or fund. Social Security will certainly give Daniel some income if he retires at his “full-retirement age” of about 67, but, on average, Social Security provides only about 40 percent of pre-retirement earnings, depending on one's income while working. Like everyone, Daniel needs to plan carefully for his retirement and whatever his future might hold.
Daniel can find out how much he will receive from Social Security by looking at his annual Social Security statement. This personalized statement is mailed to everyone each year. He could also use the Social Security benefit calculators at www.socialsecurity.gov/retire2  to estimate his future Social Security benefit. Return to questions