// BEGIN editorial data var i = 0; var CrackedEggQuiz_060531 = new Array(); CrackedEggQuiz_060531.ID = "CrackedEggQuiz_060531"; CrackedEggQuiz_060531.ID_WB = 13068356; CrackedEggQuiz_060531.vote = "CrackedEggQuiz_060531_vote"; CrackedEggQuiz_060531.navsectionID = "3032071" CrackedEggQuiz_060531.sPubDate = "6/14/2006 12:57:35 AM GMT"; CrackedEggQuiz_060531.quiztype = 1; CrackedEggQuiz_060531.appFmt = 0; CrackedEggQuiz_060531.bDispQNums = 1; CrackedEggQuiz_060531.appWidth = 460; CrackedEggQuiz_060531.appDeck = new Array("Do you have what it takes to save and manage your retirement nest egg? Test your knowledge of ten key areas you’ll need to know to meet your retirement goals.","You answered of questions correctly. Scroll down to see answers for each question and learn how well your score compares to other retirement savers. "); CrackedEggQuiz_060531.headHeight = 40; CrackedEggQuiz_060531.copyMargin = 9; CrackedEggQuiz_060531.copyBorder = 0; CrackedEggQuiz_060531[1] = new Array(); CrackedEggQuiz_060531[1][0] = new Array("The age at which full Social Security benefits are paid for those born 1960 and later is:"); CrackedEggQuiz_060531[1].answer = "Currently, 67 is the age of full retirement for anyone born in 1960 or later. The earliest anyone can claim their Social Security benefits— assuming disability is not involved — is at age 62. But if you start collecting then, you’ll only get 70 percent of your full benefit and you’ll collect the smaller amount for life.

For those born in 1937 or earlier, full retirement age comes at 65. If you were born from 1938 to 1959, your benefits are on a sliding scale that rises every 2 months between age 65 and 67.

So, while many financial planning articles assume you’ll retire at age 60, you’ll have to wait longer to meet Social Security’s definition of full retirement."; CrackedEggQuiz_060531[1][1] = new Array("59-1/2",'',0); CrackedEggQuiz_060531[1][2] = new Array("62",'',0); CrackedEggQuiz_060531[1][3] = new Array("65",'',0); CrackedEggQuiz_060531[1][4] = new Array("67",'',1); CrackedEggQuiz_060531[2] = new Array(); CrackedEggQuiz_060531[2][0] = new Array("According to current life expectancy tables, a 65-year old man can expect to spend how many years in the retirement phase of his life? What about a woman of the same age?"); CrackedEggQuiz_060531[2].answer = "Death is sexist. According to the Social Security trustees report for 2005, a 65-year old man today is expected to live until age 82 on average, while a 65-year old woman is expected to live to 85. But, these are averages—neither promises nor sentences.

The odds of outliving the life expectancy tables are rather good -- especially if you lead a healthy lifestyle."; CrackedEggQuiz_060531[2][1] = new Array("12 and 15 years",'',0); CrackedEggQuiz_060531[2][2] = new Array("17 and 20 years",'',1); CrackedEggQuiz_060531[2][3] = new Array("20 and 20 years",'',0); CrackedEggQuiz_060531[2][4] = new Array("25 and 25 years",'',0); CrackedEggQuiz_060531[3] = new Array(); CrackedEggQuiz_060531[3][0] = new Array("If you put $20,000 in an employer sponsored 401(k) retirement plan when you’re 30, made no contributions for the next 32 years, and got an annual return of 6 percent, how much would you have saved for retirement by age 62? "); CrackedEggQuiz_060531[3].answer = "Thanks to the compounding of returns — re-investing both the income and appreciation from your savings in a tax-advantaged account — the balance will grow to $129,000 even if you don’t add money. Given the time involved, even at a modest rate of return, you’ll build a significant net egg if you leave it alone.

This is why job switchers are encouraged to rollover their 401(k)s -- no matter how small -- into either the new employer’s plan or into a more portable IRA. It may look inconsequential, but over time, these ‘orphan’ amounts can grow into sizable nest eggs. See the recent NASD Investor Alert on this subject for more information."; CrackedEggQuiz_060531[3][1] = new Array("$20,000",'',0); CrackedEggQuiz_060531[3][2] = new Array("$69,600",'',0); CrackedEggQuiz_060531[3][3] = new Array("$129,000",'',1); CrackedEggQuiz_060531[3][4] = new Array("$206,600",'',0); CrackedEggQuiz_060531[4] = new Array(); CrackedEggQuiz_060531[4][0] = new Array("What is the maximum amount most individuals may contribute to a 401(k) plan for 2006?"); CrackedEggQuiz_060531[4].answer = "For 2006, the maximum contribution is a flat $15,000, though those 50 and older can make an additional $5,000 “catch up” contribution. Contributions to 401(k) plans are made pre-tax, creating a tax savings for the year they are made. The income or appreciation earned within the accounts builds free of taxes.

But most people don’t take full advantage of these plans. Despite the benefits of tax savings and employer matching programs, only an estimated 11 percent of all 401(k) participants contribute the legal maximum, according to the Federal Reserve’s 2004 Survey of Consumer Finances. "; CrackedEggQuiz_060531[4][1] = new Array("6 percent of pre-tax wages",'',0); CrackedEggQuiz_060531[4][2] = new Array("25 percent of after-tax wages",'',0); CrackedEggQuiz_060531[4][3] = new Array("$15,000",'',1); CrackedEggQuiz_060531[4][4] = new Array("$2,000",'',0); CrackedEggQuiz_060531[5] = new Array(); CrackedEggQuiz_060531[5][0] = new Array("In 2004, the last year for which data was available, the typical household approaching retirement had 401(k)/IRA holdings of only $60,000. About how much income would this generate for a couple in retirement?"); CrackedEggQuiz_060531[5].answer = "Using a very generous income yield of 8 percent, $60,000 would only be expected to generate about $4,800 a year. To put that in perspective, the maximum monthly Social Security benefit is $2,053 for 2006 -- which comes to $24,636 a year.

With fewer and fewer retirees entitled to company pension and health insurance benefits, that $60,000 won’t go very far to support the lifestyle goals of most retirees. To see how far your nest egg will take you, check periodically with sites like MSNBC.com’s retirement planner or ChoosetoSave.org to make sure you’re saving enough to meet your goals."; CrackedEggQuiz_060531[5][1] = new Array("$400/month",'',1); CrackedEggQuiz_060531[5][2] = new Array("$600/month",'',0); CrackedEggQuiz_060531[5][3] = new Array("$1,000/month",'',0); CrackedEggQuiz_060531[5][4] = new Array("$3,000/month",'',0); CrackedEggQuiz_060531[6] = new Array(); CrackedEggQuiz_060531[6][0] = new Array("How much protection do investors have against losses in the stock market?"); CrackedEggQuiz_060531[6].answer = "There are no guarantees when investing in the stock market. Though returns on stocks have historically been higher than on other assets, that higher return actually reflects the greater risk of loss.

That comes as news to most investors. A 2003 survey conducted by the NASD found nearly two-thirds either didn’t know or believed they were insured against losses in the stock market. While class-action lawsuits are often filed on behalf of shareholders in cases of alleged fraud—not just because the market went down—dismissals are not uncommon.

Even where fraud is proven or a settlement is reached, shareholders rarely get all their money back, often receiving just pennies for each dollar they lost. A rule of thumb when investing is that the higher the expected return, the greater the risk of loss. That is why financial advosrs always recommend diversification among different types of assets and different types of stocks -– and not putting your nest egg in one basket."; CrackedEggQuiz_060531[6][1] = new Array("Only to the extent of their original investment.",'',0); CrackedEggQuiz_060531[6][2] = new Array("For the full market value of their investment.",'',0); CrackedEggQuiz_060531[6][3] = new Array("Up to $100,000.",'',0); CrackedEggQuiz_060531[6][4] = new Array("None of the above.",'',1); CrackedEggQuiz_060531[7] = new Array(); CrackedEggQuiz_060531[7][0] = new Array("A no-load mutual fund is one which:"); CrackedEggQuiz_060531[7].answer = "No-load mutual funds carry no sales charges –- the commission paid to the broker who sold you the fund. The fund itself, however, does charge you fees to cover costs like the salary of the investment manager choosing the investments made by the fund. The higher the fees, the more pressure it puts on the fund to cover those fees and still outperform the general market.

When the NASD asked this question as part of its Investor Literacy Survey in 2003, only 21 percent got the right answer. Because fund expenses can lower expected returns, you should compare so-called “expense ratios” –- the total fees charged as a percent of assets -- along with return histories to see if those expenses are hurting the fund’s performance.

And even though no-load funds have no sales charges, you may still have to pay a transaction fee if you invest through a brokerage firm or fund “supermarket” instead of investing with the fund directly. Also, to discourage frequent trading, some funds may assess a penalty for short-term ownership. Buying direct and holding long term will avoid any such fees. For information on expense ratios and a quick picture of returns, risks and the makeup of funds, check Morningstar or MSN’s MoneyCentral.
"; CrackedEggQuiz_060531[7][1] = new Array("Carries no fees",'',0); CrackedEggQuiz_060531[7][2] = new Array("Carries no sales charges",'',1); CrackedEggQuiz_060531[7][3] = new Array("Contain no high-risk securities",'',0); CrackedEggQuiz_060531[7][4] = new Array("Is free from taxes",'',0); CrackedEggQuiz_060531[8] = new Array(); CrackedEggQuiz_060531[8][0] = new Array("For people who don’t have the time -– or don’t want to spend the energy -- to monitor and manage their retirement account, the safest plan is to:"); CrackedEggQuiz_060531[8].answer = "So-called target funds are especially designed to let investors make a single selection and spread their savings across all the asset classes they need. The fund manager then makes all the decisions based an investors’ targeted retirement age. Many balanced funds can also accomplish this, as long as they offer exposure to international as well as domestic markets.

While these funds probably won’t be among the highest performers from year to year, over time they will produce a big enough return to reach your retirement goals. Aggressive funds typically do not repeat as the highest performers year to year and are highly volatile. Choosing the right one and moving in and out takes time, energy and attention.

Cash equivalent or stable value funds offer low return and, over time, may fall short of your savings goal. They are most appropriate when you’re beginning retirement or when you need to make withdrawals once you’re retired. Even then, you shouldn’t use them for all your savings."; CrackedEggQuiz_060531[8][1] = new Array("Take the guaranteed returns offered by “cash equivalent” or “stable value” funds: better safe than sorry",'',0); CrackedEggQuiz_060531[8][2] = new Array("Go for it and invest only in stock funds with the highest return each year.",'',0); CrackedEggQuiz_060531[8][3] = new Array("Invest a little bit in every fund offered to avoid being wrong.",'',0); CrackedEggQuiz_060531[8][4] = new Array("Choose a “target” -- or balanced fund option.",'',1); CrackedEggQuiz_060531[9] = new Array(); CrackedEggQuiz_060531[9][0] = new Array("Of the following, which does not belong in a 401(k) or IRA-type retirement account?"); CrackedEggQuiz_060531[9].answer = "While municipal bonds, especially triple-A rated municipal bonds, are safe investments, they are of little use in a tax-sheltered retirement account since you’re already paying no tax on them. They are best used in a personal savings account, but only if their yield is better than the after-tax yield on a U.S. Treasury or other bond with similar rating, coupon and maturity.

Junk bonds, on the other hand, have provided good historical returns, in line with stocks, when held through a mutual fund and over very long periods of time. Junk bonds, despite their unpleasant name, are not throwaways. They are not defaulted bonds, just bonds that have been rated as “below investment grade” by the rating agencies for any number of reasons.
"; CrackedEggQuiz_060531[9][1] = new Array("U.S. Treasury bonds",'',0); CrackedEggQuiz_060531[9][2] = new Array("AAA-rated municipal bonds",'',1); CrackedEggQuiz_060531[9][3] = new Array("Junk bonds ",'',0); CrackedEggQuiz_060531[9][4] = new Array("Investment-grade corporate bonds",'',0); CrackedEggQuiz_060531[10] = new Array(); CrackedEggQuiz_060531[10][0] = new Array("What happens to the price of bonds when interest rates go down?"); CrackedEggQuiz_060531[10].answer = "Bond prices and interest rates typically move in opposite directions. When the level of interest rates rises, bond prices fall. When interest rates fall, it is generally a good thing for bondholders because it leads to price gains that can rival stocks.

This “upside down” relationship between bond prices and interest rates is a concept that many people have trouble with. In a 2003 survey conducted by the NASD, only 40 percent of the respondents answered this question correctly.

Though bonds are often painted as dull and irrelevant to retirement saving, they offer needed diversification away from the stock market’s volatility. Bonds also create positive returns as regular dividends are reinvested. Later in life, those dividends can be used to create a steady source of income during retirement. To get the basics on bonds, check out the NASD’s smart bond investing page.
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