A Quiz To Find Your Retirement Price Tag


Your school days may be behind you, but that doesn't mean you shouldn't test yourself on various subjects from time to time.

One of the most important topics you can study is retirement planning.

So, spend a couple of minutes on this quiz. The answers -- and even the questions -- may prove valuable as you save and invest for retirement.

Ideal retirement

Have you put a "price tag" on your retirement lifestyle?

All of us have different ideas of the "ideal" retirement.

Your brother may plan to travel the world, your sister may want to open a small business and you may choose to volunteer.

Once you know how you want to spend your retirement years, you can calculate about how much your retirement will cost.

A financial adviser can help you arrive at a good estimate of how much you'll need to spend per year.

Values of a 401(k)

Do you contribute to a 401(k) or other employer-sponsored retirement plan?

If you have a 401(k) or similar plan where you work, you'll receive several key benefits by contributing.

First, your money can grow on a tax-deferred basis, which means it can potentially grow faster, than if it were placed in an investment on which you paid taxes every year.

Second, you typically invest pre-tax dollars, which means your contributions can actually help lower your annual taxable income.

And third, you can spread your dollars among a range of professionally managed investment choices.

Boosting contributions

Do you boost your 401(k) contributions every time your salary increases?

If you don't, you should.

Your annual 401(k) contribution limits are pretty high: $15,500 in 2007, or $20,500 if you're 50 or older.

Obviously, the more you contribute, the greater your chances of achieving your retirement savings goals.

An IRA can help

Do you also contribute to an IRA?

Even if you contribute to a 401(k), you can put money in an IRA.

A traditional IRA can grow tax deferred, while a Roth IRA offers tax-free earnings potential, provided you've had your account at least five years and you don't start taking withdrawals until you're age 59-1/2. (Income limits apply to the Roth IRA, however.)

In 2007, you can put $4,000 into an IRA, or $5,000 if you're 50 or older. And you can fund your IRA with a variety of investments.

Self-employed considerations

If you're self-employed, have you set up a retirement plan?

If you work for yourself or run your own small business, you'll need to set up a retirement plan.

Fortunately, you have many attractive options, all of which offer tax deferral and a range of investment choices.

Depending on your situation, you can establish an "owner-only" 401(k), a SEP-IRA, a SIMPLE IRA or a Keogh plan. Your tax adviser can help you select the plan that's right for you.


Have you explored other retirement savings vehicles?

If you've "maxed out" on your IRA and 401(k) or self-employed plan, but you can still afford to put away more for retirement, you'll want to explore other investments, such as annuities, which offer tax-deferred growth potential and have very high contribution limits.

There's no passing or failing grade to this quiz -- but if you've answered "yes" to all the questions, then you're probably putting yourself in a good position to make progress toward your retirement goals.

~Ross Hage is a licensed financial adviser with the firm of Edward Jones. For more information, call him at 928 468-2281.

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