Most of my entries are with regard to self-directed IRA and 401K accounts and how you can invest these retirement monies into non-traditional asset classes (e.g., real estate). However, I came across an August 8, 2008, "USA Today" article, titled, Pop quiz! How well do you know your finances? by John Waggoner.

This article is a fun little quiz that most people may not do too well at answering the questions. Take a look at the questions and see how you do. Enjoy!

Pop quiz! How well do you know your finances? "by John Waggoner, "USA Today"
If you're saving for retirement, you probably have many questions.
How can I shield my savings from taxes for as long as possible? What can I expect from Social Security and Medicare?

Where can I get the best returns from my money?

We can't give you all the answers for your retirement here, but we can help you check your knowledge in four key areas: taxes; saving and investing; Social Security; and Medicare/Medicaid.

Try our quiz. Answers and explanations are below each question. Try not to peek.


Question: Can you deduct losses from a retirement account?

Yes No

Answer: No.

Losses from the sale of stocks, bonds, mutual funds or other securities in a retirement account aren't deductible. And if you invest through a tax-deferred traditional IRA or a 401(k) savings plan, all the money you withdraw will be taxed as ordinary income. That's why many people prefer Roth IRAs, which hold after-tax dollars. As long as you've owned your Roth at least five years and are 59½ or older, all your withdrawals — your contributions plus the earnings they've produced — are tax-free.

In general, it's best to keep income-oriented investments, such as bonds and bond funds, in traditional IRAs and 401(k) savings plans. Investments aimed at producing capital gains — which are generally taxed at lower rates — might be best held in a taxable account.

Q: Can you deduct contributions to a traditional IRA if you have a pension?

Yes No

Answer: Yes.

But many people can't. Single filers who have a retirement plan need modified adjusted gross income (MAGI) of $52,000 or less to claim a full deduction for their 2008 IRA contribution. Joint filers need MAGI of $103,000 or less to take the full deduction. Anyone can contribute to a non-deductible IRA, which shelters your earnings from taxes until withdrawal.

Q: Can you withdraw the principal from your Roth IRA without penalty?

Yes No

Answer: Yes.

You can do so at any time without penalty.

SOCIAL SECURITY

Q: How much is the average monthly Social Security payout?

A. $934 B. $1,085 C. $1,112

Answer: B.

Social Security also pays survivors insurance to widows and children, as well as disability insurance. You can estimate your payout at socialsecurity.gov.

Q: Do more people believe in UFOs than in Social Security?

Yes No

Answer: No.

The Employee Benefit Research Institute, a non-profit research group, actually investigated this frequently cited statistic and found that 71% of those surveyed had greater confidence in the future of Social Security than in the existence of UFOs.

Q: What percentage of elderly unmarried women end up receiving 90% or more of their income from Social Security?

A. 43.4% B. 57.2% C. 61.3%

Answer: A.

For unmarried women 65 and older, Social Security represents 53.4% of total income. In contrast, Social Security makes up only 38.3% of elderly men's income and 33.1% of elderly couples' income.

SAVING & INVESTING

Q: How much have large-company stocks returned annually, on average, since 1926?

A. 5.9% B. 7.1% C. 10.3%

Answer: C.

Over most long periods of time, stocks outperform safer investments, such as bonds or three-month Treasury bills. But there's plenty of variance in returns, even over 10-year periods. Consider that the S&P 500 fell an average 3.3% a year in the 10 years that ended in April 1939 — a period that encompassed most of the Great Depression.

Q: Consider two mutual funds that each earn an average 8% a year before expenses. Fund A charges 0.5% in expenses. Fund B charges 1.5%. If you invested $10,000 in Fund A today, you'd have $87,500 after 30 years. How much would you have in Fund B?

A. $80,000 B. $78,500 C. $66,000

Answer: C.

Even though they may seem small, fund expenses can clobber your returns over time. You can compare mutual fund expenses at the Securities and Exchange Commission's website: sec.gov. Click on "Calculators."

Q: Assuming you're 25 and earn 8% a year, how much do you have to save each month to have $1 million at 65?

A. $53 B. $187 C. $286

Answer: C.

The earlier you start saving, the less you'll have to save each month. If you start at 21, you'll need to save $206 a month. Start at 55, and you'll have to sock away nearly $5,500 a month to have $1 million in 10 years.

MEDICARE & MEDICAID

Q: At what age can you take Medicare benefits?
A. 62 B. 65 C. 67

Answer: B.

If you retire before 65, you should make sure you have health insurance coverage.

Q: True or false: You're 77 and need full-time nursing care. You can give away your assets to friends and relatives and then receive Medicaid assistance.

A. True B. False

False.

Medicaid is intended for the truly destitute, and if you transfer assets to qualify, you'll be disqualified for a period of time. Typically, for example, if Medicaid pays $150 a day for nursing home care and you gave away $100,000 in assets, you'll be disqualified for about 666 days ($100,000 divided by $150).

Furthermore, states will check back five years to see whether you've transferred assets to someone else.

Thanks to "USA Today" and John Waggoner for the fun little quiz. As individuals we must continually try to educate ourselves on our financial well-being. Many of us take the time and effort to make our minds and body more healthy....we need to do that as well with our financial being.

John R. Park is President of PGI SelfDirected and and co-founding Partner of Fulcrum Investment Network.

There are many articles written about the permissibility of self-directing one's retirement assets....this author included. It is still amazing that while the process of self-directing is in its relative infancy, the vast majority of individuals in this country don't understand that you can self-direct your own retirement assets. Of course, IRS and Department of Labor (specifically, pertaining to self-directed 401k accounts) rules must be adhered to and met, but the opportunity for many to self-direct is not only inviting but, in many people's minds, necessary to some degree.

As the old saying (or maybe it is my saying) goes: "Who is a better steward of your money, the person who needs it (you) or the person who is paid to invest it?"

One interesting point always comes up with individuals looking to self-direct but not wanting to place all of their retirement assets in non-traditional assets investments. They typically ask the question about how they can keep a portion of their assets into traditional offerings (e.g., stocks, bonds, mutual funds).

A word to the wise when going down this path....ask this question to either the custodian, administrator or facilitator who is assisting you in setting up either your self-directed IRA or 401k. With many custodians, administrators or facilitators, they will assist the client in setting this up, but the client has to pay a transactional fee, account maintenance fee, or both just to perform this function. This does not have to occur and, if it does, it should be a very modest fee.

Individuals enter into agreements to establish self-directed IRA or 401k accounts because: 1) they feel they can do a better job of investing the money than who they are currently paying (e.g., broker), and 2) they feel they can minimize their expenses. Why should they move their retirement assets and pay some other entity a transactional fee or account maintenance fee just to buy the same stocks, bonds and mutual funds they may have owned before going self-directed?

If truly self-directed, an individual should be able to take control of the transactions and the investments they may make without paying additional monies for transactions. Individuals should be and are able to only pay for the transaction of establishing the self-directed accounts within IRS regulations on a one-time basis, not incurring a charge every time they conduct transactions within their self-directed account. This is typically referred to as a "true checkbook control" of their account. Even though some of these "true checkbook control" custodians, administrators or facilitators levy additional fees just for the execution of transactions by the client.

Self-direction? A great idea for many. However, one should conduct their due diligence on who they may utilize to assist them in setting up this account, but also feel comfortable that they are not "pumping the meter" every time they conduct business.

John R. Park is President of PGI SelfDirected and co-founding Partner of Fulcrum Investment Network