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Give Yourself A "Wealth Check-Up"

By Jane White, President of the Retirement Solutions LLC and a former financial journalist. She can be reached via email at Jane@retirement-solutions.us. The Retirement Solutions Foundation is a non-partisan organization dedicated to educating the public about saving for retirement.

Remember when the only time people moved was because of a job transfer - not to "trade up" to a bigger and better house? As recently as 20 years ago, the word "McMansion" didn't exist-and the only people who could afford to live in regular mansions were rich people. Contrary to popular opinion, investing for retirement doesn't take special skill and knowledge, for the most part it means not wasting money on items that will become obsolete, not getting into debt and hanging onto one of your biggest assets: the roof over your head. Take this quiz to see if you're on track.

1. How often do you replace your cell phone?

a) As soon as they offer a new feature or free Anytime Minutes
b) Whenever I lose it, which is once a year
c) What's a cell phone?

2. How old is your TV?

a) Less than a year
b) Pre-plasma
c) Made before they invented remotes

3. When was the last time you remodeled your kitchen

a) When they invented Sub-Zero refrigerators
b) When they invented Corian countertops
c) When they invented Formica countertops

4. How old is the oldest car in your household?

a) One year or less
b) Between two and five years old
c) More than five years old

5. How much do you spend on a typical vacation?

a) More than $1,000
b) Between $500 and $1,000
c) Less than $500

6. Have you recently refinanced your mortgage or are you tempted to do so? If so, what did you (or would you) do with the money?

a) Went on vacation
b) Bought a car
c) Lowered my mortgage payments

7. How much do you owe in credit card debt?

a) More than $5,000
b) Between $1,000 and $5,000
c) Less than $1,000

8. You are 45 years old and you just found out that the value of your five-year-old home has doubled. What do you do?

a) Sell it and trade up to a bigger house
b) Use a home equity loan to make home improvements
c) Nothing

9. Do you own a Hummer or would you consider buying one?

a) Are you crazy? Ugly, gas-guzzling AND constantly in the repair shop?
b) But...but...they're so EXPENSIVE looking!
c) Don't tell anyone, okay?

10. You're 45 and you've got $50,000 in your 401k account. You've just been laid off from your job. You have a choice of "cashing out" your 401k balance or rolling it over to an IRA. Should you tap into your account?

a) Yes because it's less embarrassing than borrowing from my parents.
b) No way! I'll owe taxes and penalties to the IRS.
c) No way! I'll owe taxes, penalties AND rob myself of all of that compound interest that would be building on that money.

11. How much money is in your 401k account?

a) Less than $10,000
b) Between $10,000 and $50,000
c) More than $50,000

12. Do you have retirement savings outside of your 401k plan such as in a Roth IRA or separate investment account (not including a company pension or a rollover IRA)?

a) No
b) Yes

13. How much money do people need to save compared to their salary right before retirement?

a) At least twice their salary
b) At least five times their salary
c) At least 10 times their salary

14. What is the likelihood that an American family will file for bankruptcy compared to filing for divorce?

a) Less likely
b) The same
c) More likely

15. How does today's bankruptcy rates compare with that of the Great Depression?

a) The same
b) Twice as much
c) More than 10 times as much

16. In 2003, household borrowing in America was almost $8.7 trillion, 108% of disposable income. How does the $8.7 trillion figure compare to the assets in all 401k plans in 2003?

a) Half the amount
b) About the same amount
c) More than four-and-a-half times the amount


Questions 1 through 11 except 9: Give yourself one point for every a) answer, three for every b) answer and five points for every c) answer.

Question 9: Give yourself one point if you checked a), subtract 3 if you checked b) and subtract 5 if you checked c).

Questions 11 to 16: Give yourself 3 points if you checked 12 b) and 13-16 c), otherwise none.

Judging your score:

Score Where You Stand
10-20 Hey, Big Spender: Time to have a yard sale and start over? The only problem is: who would buy your used cell phones and TVs? And you can't sell that vacation you took to Aruba. How about vowing to tackle excess spending by checking out three great websites on MSN:

Manage Debt at http://moneycentral.msn.com/articles/smartbuy/debt/contents.asp and
Savings and Debt at

21-49 Could Be Worse, But: You could be spending more, but you could spend less. Take a vital first step to retirement wealth by paying off credit card debt, cutting back to one credit card (it's tough to rent cars without one) and using a debit card. It wouldn't hurt to check out the web-sites above.
50-65 Ben Franklin Would Be Proud: Our congratulations for not letting your friends' and neighbors' spending habit determine yours. When it's time to retire, there's a good chance you'll be ready and they'll still be working. Keep up the good saving!


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