Read time: 2 minutes
Understanding your retirement plan is one of the first steps you can take toward financial wellness. Being financially fit isn’t just investing in your retirement plan, it’s understanding how the choices you make with your money will impact the rest of your life. And Vanguard is more than the home for your retirement plan—it’s a one-stop shop for all of your financial needs.
Feeling like a financial whiz?
Put your knowledge to the test! Start by taking a quiz created by Vanguard. Whether you know the answer or not, we’ll provide you with a way to learn more—and help you figure out what steps you should take next.
1. What are the building blocks of a long-term investment strategy?
- Stocks
- Bonds
- Both
C is correct! Balance is a critical component of a sound investing strategy.
Learn more. If you don’t know the difference between the two, begin with the investing basics.
2. How much should the average person save annually for a comfortable retirement?
- 0% to 2% of your salary
- 3% to 5% of your salary
- 6% to 8% of your salary
- 12% to 15% of your salary
D is correct! Vanguard suggests that you save 12% to 15%, which includes your contributions and any employer contributions you might receive.
Learn more. If that seems like a lot to save, learn how contributing more to your plan is easier than you think.
3. How much money does Vanguard recommend having as a starting point for your emergency savings?
- Enough to cover 2 to 4 weeks.
- Enough to pay your expenses for the next 3 to 6 months.
- Both.
C is correct! This question has multiple answers.
For short-term spending shocks, like fixing your refrigerator or paying for car repairs, consider having at least $2,000 or enough money to cover 2 to 4 weeks of expenses. If you’ve lost your job, which is an income shock, having 3 to 6 months of your living expenses covered is a good foundation.
Learn more. If you aren’t sure how much money you should be putting away or where, watch this emergency savings video.
4. What can you use to replace your income once you’ve retired?
- Your retirement plan savings.
- Your money in an IRA.
- Social Security.
- All of the above.
D is correct! It depends on what retirement income is available to you.
Learn more. If you're worried about staying retired, we have retirement income tips for you.
5. True or false—saving in your plan cuts taxes.
- True
- False
True! Saving in your plan can reduce your taxes—either today or in retirement. Pre-tax contributions let you keep more of your paycheck and worry about taxes later. If you choose Roth after-tax, you’ll pay taxes on contributions upfront and save later.1
Learn more. If you're not sure what tax break is right for you, review the contribution types.
6. After I’ve saved in my retirement plan, what can I do next?
- Open a brokerage account to fund other goals, like buying a new home.
- Start your emergency savings fund.
- Invest in an IRA to supplement your retirement savings.
- Fund someone’s education with a 529.
- All of the above!
E. All of the above! Every investor has their own unique financial goals.
Learn more. If you're not sure what to do next, see the types of accounts that might fit your investing needs.
Happy with your answers?
Hopefully you learned a couple of steps you can take on your journey to financial wellness. If you’d like to keep learning about what you can do with your money, check out our library of articles on all these topics and more.
And start putting what you learned today into practice. Your future is in your hands!
Whenever you invest, there’s a chance you could lose the money.
1 Taxes: Taking money from your retirement account can affect how much you’ll have to pay in taxes. You’ll owe taxes on pre-tax money. You won’t owe taxes on Roth earnings as long as you are age 59½ or older and it’s been at least five years since your first Roth contribution. If required by law, Vanguard will withhold federal and state taxes from the taxable portion of your withdrawal. You may need to pay a 10% federal penalty tax if you take money out early.