Retirement test – By Bill Storie


Pink Piggy Bank On Top Of A Pile Of One Dollar Bills

The Olderhood Test:- Are you financially ready for Retirement ??

Note: this test was first published one year ago. If you are seeing it for the first time, please proceed. If you took the test last year – review your answers again and ask yourself has anything changed?


This is not an interactive online test, so a pen and paper is needed to write down your answers, then check your scores at the foot. No cheating now ..!!

Topic Options
Home (a)      Own main home outright, no   mortgage.(b)     Own main home, but with   remaining mortgage(c)      Rent main home(d)     Live with relatives
Pension Fund Management (a)      Managed entirely by   professional managers who have full discretion(b)     Managed by professional   managers, with whom I meet to review annually(c)      Managed by myself(d)     Managed by a relative
Pension Fund Make-up (a)      All ordinary shares –   self-managed(b)     All bonds – self-managed(c)      All mutual funds –   professionally managed(d)     Balanced portfolio –   professionally managed
Credit cards (a)      Paid off in full monthly(b)     Minimum amount due paid   monthly(c)      In arrears(d)     Don’t have any credit cards
Transportation (a)      Don’t own a car(b)     Car paid for in full, but old(c)      Car not yet paid off(d)     Car paid for in full and new
Health insurance (a)      Still in last employers plan   paid by them(b)     Still in last employers plan,   paid by me(c)      I have my own personal plan(d)     I don’t have any health   insurance
Long-term Health Care Plan (a)      My existing plan covers me to   death(b)     My existing plan covers me   with restrictions(c)      My existing plan covers me   until a certain age(d)     I don’t have a long-term   health plan
Vacation Budget (a)      I pay as I go and have no   budget(b)     I budget by trip(c)      I budget by year(d)     I rely on relatives to pay
Personal Budget (a)      I am very frugal(b)     I budget weekly/monthly(c)      I pay as needed and don’t   deprive myself(d)     I am quite reckless
Inheritance (a)      I intend to leave the bulk of   my retirement fund to family(b)     I intend to leave nothing to   family(c)      I will not deprive myself, so   what is left is the inheritance(d)     I have pre-determined targets

End of Test

Now score yourself below

Topic Points and Comments
Home (a)      4 … as long as the   house is in good condition and won’t require major repairs, this is the   perfect position to be in.(b)     3 … as long as the   monthly payments are affordable and the house is not in need of major   repairs, this is very acceptable.(c)      2 … this is all   about affordability and sustainability. If the rent is ok and the lease is   renewable at same or similar rent, then this is acceptable.(d)     2 … nothing wrong   with this price-wise, unless they are charging you too much. The issue really   is whether you get thrown out if a dispute arises, and thus have to find   alternative accommodation at perhaps a higher cost.
Pension Fund Management (a)      3 … the concern here   is that your managers are probably not in sync with your changing needs and   responsibilities. Do they understand your situation..?(b)     4 … much better. As   long as they listen to you and act accordingly and you can subsequently check   that they do what they said in the review meeting.(c)      2 … totally depends   on your knowledge and skills. No-one knows your requirements better than you,   so if you can balance your needs with the returns, this is quite acceptable.(d)     1 … unless he/she is   a financial professional, this is dangerous. If they take their eye off the   ball, you could end up in a “no-fix” situation. Not great.
Pension Fund Make-up (a)      2 … at the older end   of the age spectrum, this is dangerous. You are relying on a mix of good   judgment, tip-offs and luck. Be careful. High risk.(b)     3 … slightly better   than above. Be careful of the maturity conditions from the borrower and the   resultant replacement cost and/or return. Medium risk.(c)      3 … the key advantage   is the professional management of the funds themselves, which is good. The   only concern is whether your advisor is willing (and capable) to suggest other   funds in the event of poor performance of your existing funds.(d)     4 … probably the top   choice of this section. If the expected returns closely fit your income   requirements, then this is an excellent choice.
Credit cards (a)      4 … the ideal   position. Just ensure that your spending in any given month does not exceed   your monthly payment.(b)     3 … keeping pace   with the minimum balance is perhaps the option chosen by most. The   accumulating interest is rarely considered – it should be, but isn’t.(c)      1 … not good at all.   If the monthly minimum payment is not met, then any number of complications   will arise. Perhaps worth meeting with the issuing bank to discuss payment   terms.(d)     4 … as long as this   doesn’t restrict your lifestyle, then no credit cards means no worries about   meeting minimum or monthly payments. Good for you.
Transportation (a)      4 … if you don’t   have a car, but can otherwise get about, and can afford that mode of   transport (taxi, bus, train, etc), then you’re in fine shape financially.(b)     2 … the asset is   probably not that valuable, and if the car will soon be needing major repairs   and/or needs to be replaced, then this situation is not wonderful.(c)      3 … this all depends   on age and condition of the car. If the remaining payments are manageable,   and there’s a good few years in the car left, then this is not too bad.(d)     4 … all things being   equal, the car will last a good number of years. Good position to be in. Then   the only issue would be the replacement of the car down the road, so to   speak. But, that’s a fresh round of budgeting some ways down the line.
Health insurance (a)      4 … perfect. As long   as there are no age limitations or health restrictions, and as long as the   employer remains in business, this is ideal. If you are covered otherwise in   a State-sponsored scheme (e.g. National Health Service in Britain), then you are protected.(b)     3 … not bad really.   The point is that you DO have coverage – critical. It will also be economical   as well, because being part of a group plan, your premiums will be “controlled”   by the premium structure of the group as a whole, and not influenced by your   personal circumstances.(c)      3 … if this has no   age restrictions, or health-related restrictions, and is affordable, “today”,   and more especially “tomorrow”, then fine.(d)     1… not good at all.   You are presumably relying on State coverage or charity. If you have no   alternative, through cost or age, then you have no alternative. But hopefully   you are not in this category by choice.
Long-term Health Care Plan (a)      4 … perfect.(b)     3 … if the   restrictions are of a potentially serious nature, then this could become a   problem in later years. Unless you know of a pre-existing condition which   would fall into the restricted category and can budget for in some other   fashion, this fine – otherwise, you are potentially trapped in “no man’s   land”. If the issue does arise it can only be handled at that time. Not   great, but probably few realistic option.(c)      3 … there’s no way   of knowing how future health will treat you, unless as above, you are aware   of a pre-existing condition. If there is an age limit, then you can only   realistically handle the situation at the time. Not great, but little option.(d)     1 … in simple terms,   if you don’t have one, then there’s little you can probably do about it now.   If however, you opted out of some earlier plan, then that wasn’t a good   choice. If you can, at this age, somehow get some form of plan, then   seriously consider it.
Vacation Budget (a)      2 … if your budget   can handle the variances month by month, then this probably works for you.   Big trips are generally taken earlier on in retirement than later, due to age   and perhaps health matters. Thus, the budgeting over the entire rest of your   life probably works out fine.(b)     3 … perfectly   workable. As mentioned above, the big trips typically come earlier than   later, so if your budget is strong enough, then this approach is fine.(c)      4 … through a   rational estimation process, this is the best method. It allows a clear   assessment of budgetary needs on an annual basis, which can easily be worked   into your month by month cash flows. There should be no restrictions imposed   by you however – in other words, if you exceed the annual budget in say   October, then by all means spend the extra – or “steal” from next year’s   budget.(d)     2 … might be OK, but   if you want to go to Tahiti and they think it’s a daft idea, you may not see Tahiti. It restricts your freedom of choice, but   financially it should be workable.
Personal Budget (a)      2 … everyone in   retirement is frugal. Well, for a while at least. Then reality sets in and   the decision is made to enjoy your retirement as best you can, albeit within   financial reason. Therefore, it’s not really a financial strategy, just a   frame of mind.(b)     4 … this is probably   the best strategy. The ideal approach is to prepare an annual budget, divide   it by 12 months, and monitor it monthly. Miscalculations can be spotted   easily and quickly, and adjusted as necessary.(c)      3 … this is fine if   generally speaking you don’t have too many spontaneous purchases. Obviously   you will know your own cash limitations and your own expense fluctuations. If   you have a handle on both, then the risk factors are probably quite low. So,   not the best accounting in the world, but probably fine.(d)      1 … being reckless is in everyone’s nature, so   don’t beat yourself up too much. The issue is whether you do it all the time,   and completely disregard your bank statements. Clearly if you have enough   money then who cares. However as a financial planning strategy it isn’t too   smart. Think about it.
Inheritance (a)      3 … there’s a   difference between being “noble” and being “prudent”. It’s not for us to   opine on whether you should, or should not, leave your money to the kids. That   is your decision entirely. We would only ask that if your decision is to   leave them the money, will you deprive yourself of the pleasures of   retirement ..?(b)     3 … again, this is   your call. Obviously if you don’t have enough to live comfortably AND leave   worthwhile money to the kids, then the decision probably makes itself. If   other non-financial issues are in play (“I don’t like them !!”, for example)   then this option may be easier to accept.(c)      4 … all things being   equal, this is probably the best approach. Moreover, it would be most unusual   if the kids disagreed. Throwing money away needlessly would probably not be   well appreciated by the stakeholders, but it is your prerogative. If you’re   happy with your spending, and you watch it closely, then it will most likely   be smiles all around.(d)     2 … this sounds   fine, but is probably unworkable. It just seems far too restricting on your   lifestyle. There’s not much wrong with this approach in pure financial terms,   but the whole point of financial planning is to enjoy retirement without too   many binding ropes.

End of Scoring

Now Rate your score below

Total Score Comments





You are in excellent   financial shape for your retirement years.While your total score is in the top range, you will probably have   one or two specific areas that could benefit from some attention.





You are in good   financial shape for your retirement years.While your total score is good, you will probably have one or two   specific areas that could benefit from some attention.





You are in poor   financial shape for your retirement years.You probably have more areas to review and adjust than is healthy   for you at this stage in your life. You may not be able to change many of   them, you should nonetheless attempt to make changes to as many as is   feasible.





You are in very bad   financial shape for your retirement years.You really must attempt to make changes to as many as is feasible.   There are probably one or two, if not more, topics which are critical in your   personal situation, so try fixing them as soon as possible. Delay is not an   option.

One response to “Retirement test – By Bill Storie

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