Most People Can’t Pass This Multiple-Choice Quiz About Retirement

How much do you know about basic retirement issues? If you are like your peers, the answer might be “not much.”

In a survey of just over 3,600 adults in the U.S. that was part of the annual TIAA Institute-GFLEC Personal Finance Index, respondents correctly answered only 37% of key questions they were asked about retirement, on average.

So, how would you fare on the same quiz? Find out by answering the next several questions.

Social Security question

Question: Which statement about Social Security is false?

1. The amount someone receives in Social Security benefits depends upon his/her earnings during the last two years of full-time employment.
2. A worker receives Social Security benefit payments if he/she becomes disabled before retiring.
3. Social Security benefit payments will continue as long as an individual is alive, no matter how long he/she lives.
4. Don’t know

Correct answer: 1

Respondents who answered correctly: 41%

The size of your Social Security benefit depends primarily on how much income you earned during up to 35 years of your lifetime. There are other factors at play, though, as we detail in “9 Factors That Affect the Size of Your Social Security Check.”

Medicare question

Question: On average, Medicare and other government programs cover how much of an individual’s health care expenses in retirement?

1. Over 90%
2. About 2/3
3. About 1/2
4. Don’t know

Correct answer: 2

Respondents who answered correctly: 27%

Many retirees are surprised to learn that Medicare does not cover all of their health care expenses. Understanding this reality is crucial, because it can motivate folks who are still working to put away money for medical expenses they’ll incur during their golden years.

Learn more about which bills you might be responsible for paying in “Retirees, Beware: Medicare Will Not Cover These 11 Medical Costs.”

Retirement account question

Question: Latisha plans to start saving for retirement by setting aside $2,000 this year. Her employer offers a 401(k) plan and fully matches a worker’s contributions up to $5,000 each year. Under which scenario does Latisha have the largest amount in retirement savings at year-end?

1. She contributes $2,000 to the 401(k) plan and invests the money in a mutual fund that earns a 5% return during the year.
2. She contributes $2,000 to an IRA (individual retirement account) and invests the money in a mutual fund that earns a 5% return during the year.
3. It does not matter — she will have the same amount of year-end savings either way.
4. Don’t know

Correct answer: 1

Respondents who answered correctly: 43%

An IRA and a 401(k) are two separate types of retirement savings accounts that share many similarities. But a key difference is that a 401(k) often comes with an employer match. That means your company will give you additional money to invest in your 401(k) above and beyond the contributions you make to the account.

Because of this employer match, investing in a 401(k) plan leaves you with more money in your account in the scenario described above.

Lifetime income question

Question: Susan worries about living a long life and running out of money. What is the best way for her to address that possibility?

1. Buy an annuity.
2. Buy life insurance.
3. There is nothing she can do about this.
4. Don’t know

Correct answer: 1

Respondents who answered correctly: 52%

Essentially, an annuity is a financial product that involves giving a lump sum of money to an insurance company in exchange for a monthly check for the rest of your life.

Long-term care question

Question: What is the likelihood that a 65-year-old will eventually need some type of long-term care services?

1. About 30% (3 in 10)
2. About 50% (5 in 10)
3. About 70% (7 in 10)
4. Don’t know

Correct answer: 3

Respondents who answered correctly: 28%

Many older folks will need extended medical care at some point. Failing to plan for long-term care — whether in a nursing home, your home or an adult day care — can be a costly mistake. Medicare won’t cover most long-term care expenses, which is why some folks opt for long-term care insurance.

Longevity question for men

Question: On average in the U.S., how long will a 65-year-old man live?

1. About 14 more years (age 79)
2. About 19 more years (age 84)
3. About 24 more years (age 89)
4. Don’t know

Correct answer: 2

Respondents who answered correctly: 33%

Over the past century, lifespan has increased significantly for both men and women. Men now can expect to live to the ripe old age of 84. Of course, some will live longer and others will have shortened lives.

You can improve your odds of achieving octogenarian status by following the tips in “10 Things to Stop Doing If You Want to Live a Long Life.”

Longevity question for women

Question: On average in the U.S., how long will a 65-year-old woman live?

• About 17 more years (age 82)
• About 22 more years (age 87)
• About 27 more years (age 92)
• Don’t know

Correct answer: 2

Respondents who answered correctly: 33%

Women are likely to outlive men by about three years, on average. For this reason, they might need their nest egg to last a little longer than men do.