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americans retirement knowledge stand

Virtually everyone understands that money doesn’t grow on trees. But what about planning for retirement? If recent research gives any indication, many Americans may be coming up short. In the 2017 Retirement Income Literacy Quiz – courtesy of The American College for Financial Services and the New York Life Center for Retirement Income – most quiz-takers received barely-failing or below-failing grades.

To measure retirement literacy, the test comes with two options: a six-item questionnaire on key retirement planning areas, and a more comprehensive test with 38 questions. With retirement literacy and retirement planning success being closely linked, you may want to check out the six-question quiz yourself to gauge your own retirement readiness.

So, what exactly did these questions ask? And how did Americans fare in their retirement knowledge? Let’s delve into the data now.

understanding risk tolerance for retirement planning success

Like everything else we do, saving for retirement involves risk analysis. We might not think about getting in the car to go to the grocery store, or even booking our dream vacation to hike the Inca Trail in Peru, as particularly risky decisions. But there are still elements of risk involved in every choice we make.

Your risk tolerance will help to you maximize and protect your retirement savings when you make sound choices. As you save and near retirement, your risk tolerance should change, adapting to your financial and income needs. In order to manage your retirement planning effectively, you need to understand your risk tolerance, grasp your financial needs in retirement, and make effective decisions about your savings and asset allocation.

Overall, you should be ready for a “smooth” financial transition into retirement – when you stop earning a full-time salary or business income, and start drawing on the savings you accumulated over many years. Working with a financial professional will help you meet your retirement income and financial goals, like the independent financial professionals at SafeMoney.com.

Let’s go into more detail about risk tolerance and why it’s so important.

Time to diversify

You’ve heard it before: the best laid plans of mice and men often go astray. Through all stages of our personal and financial lives, we know there will inevitably be twists and turns. The market goes up, the market goes down. But there are safer routes than others for our money. While there’s no foolproof Waze app for retirement savings and investment, there are directions we can take—and avoid!

First, Let’s Look at Your Withdrawal Rate.

Two key players in the viability of your financial plan for retirement are the size of your retirement nest egg and the pace at which you plan to spend it. This is your withdrawal rate. After putting in the time and consideration to determine the magic number for your retirement and your intended rate to spend it down, you may have reservations about your actual investment portfolio and whether it will perform as expected to sustain you over time.

Since no one can say how long you will live, our lens of The Rule of 100 helps add perspective to this all-important strategy of making sure your retirement income will last.

Can You Afford to Gamble with Your Retirement Money

The stock market has been surging to new highs. For the first time ever, the Dow Jones exceeded 20,000 in January. Then on the heels of President Trump’s first address to Congress, it charged ahead yet again. The Dow posted a 300-point jump, closing at over 21,000 on Wednesday, March 1. These gains come at a time when market volatility has also been on the decline. In early February the CBOE Volatility Index – more commonly known as the “investor fear index” – showed investor concerns on the decline.

However, even as the market goes up many people still worry about their investments. What will the market do next? Do they own too many stocks? When the market goes down, will it be just be a spill, a correction, or a crash? For that matter, do they have too much money in other risky, market-based investments?

For people close to retirement, this brings up an important question. Should you stay with your current portfolio allocation mix, or is it time to move into a safer strategy?

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