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Everyone wants to guard against the threat of unexpected financial turmoil.

You know you need a plan to handle the unknowable twists of fate -- and the impact they'll have on your bank balance.

Yet even if you think you've accounted for every possible contingency, says Karin Stifler, a financial planner in Hudson, Ohio, it's likely that you're relying on some outdated advice or overly general rules of thumb.

Have you charted the right path to financial security?

Test your knowledge with these questions. Chances are, you'll learn something that will help take your future from solid to impregnable.

1. I have at least six months of expenses in an emergency fund. How many of my fellow Americans can say the same?

A. 15%

B. 45%

C. 85%


According to, more than half of Americans haven't earmarked a six-month pot of money to tide them over if they lose their job or face another unexpected financial blow. That may sound risky, says Eleanor Blayney, a Washington, D.C., certified financial planner, but many people can use a different benchmark.

If you're in a high-demand profession (think programmer, pharmacist, or engineer), you're fine with a three-month cushion.

Related: Emergency funds: Risk versus returns

Same goes for retirees collecting a pension and Social Security. But if you work in an unstable industry -- or if you're 50 or older, which adds three months to the average time it takes to find a new job -- you need up to a year's expenses.

2. If I save 10% of my income every year and retire at 65, the likelihood my money will last until I hit 95 is:

A. 40%

B. 75%

C. 95%, unless I develop a taste for Rolex watches and Fabergé eggs


Saving at least 10% of your income (not including your company match) puts you ahead of the typical 401(k) participant, who contributes 8%, according to Fidelity Investments.

For your nest egg to reach the finish line, though, better than average isn't enough. Bump savings to 15% of income -- again, not counting any match -- and the likelihood that your funds will last until you turn 95 increases to 83%, says Stifler. Can you sock away 20%? If so, your chances hit 94%.

Related: Top stock picks from top pros

To get a better idea of whether your savings are on track, plug your assets and expected income (such as Social Security payouts) into the T. Rowe Price Retirement Income Calculator at

3. Chances are, I'll keep working -- and pulling a paycheck - until I'm:

A. 62

B. 65

C. 72

D. Six feet under


While 37% of workers think they'll call it quits after age 65, the fact is the median age of retirement is holding at 62, according to the Employee Benefit Research Institute.

What accounts for the gap between expectation and reality? Health problems are the biggest factor, says EBRI, but more than 30% of people say they had to retire because they were laid off or no longer had the skills to keep a job.

To increase job security, build a "career fund" into your plan, says Rapid City, S.D., financial planner Rick Kahler. Put away a couple hundred bucks a year to fund professional memberships, classes, certifications -- anything that will keep you on top of your job.

4. My debt payments shouldn't eat up more than this percentage of my income:

A. Trick question. Any debt is too much.

B. 21%

C. 30%

D. 36%


Banks will typically turn you down for a loan when those payments exceed 36% of your income. Financial planners, though, are generally more conservative, suggesting a debt-to-income ratio of about 30%.

Most of what you owe should be "good" debt that provides a return on investment.

What qualifies? A low-rate mortgage, for example, which allows you to purchase an asset that may appreciate, or a loan that enables you to go back to school and boost earnings.

Minimizing debt will get you better terms on mortgages, loans, and credit cards, says Stifler. If you're above the 30% mark, start to cut spending now. Use the extra funds to ramp up payments on your highest-interest debt.

5. I contribute just enough to my 401(k) to get a full match. I recently got a raise. What's the best thing to do with this new money?

A. Put it in my 401(k).

B. Open a Roth IRA.

C. Buy lottery tickets.


If it's still early in your career, check out a Roth. These accounts require you to pay taxes on contributions but allow tax-free withdrawals, making them a good fit for anyone who's paying a lower tax rate now than they will in retirement.

Already in a high bracket? Stick with the 401(k). The same goes for everyone with a tendency to slack off on managing their account. After all, contributing to your 401(k) is practically automatic, while you must remember to fund your Roth.

6. If my life insurance would replace eight to 10 times my salary, I'm all set.

A. True

B. False


Okay, it may be true for some, but you still need to tailor that number to your circumstances, says Kahler.

Do you have dependents -- particularly young children -- or are you the only wage earner in your household? You may need more (up to 20 times your salary in extreme cases).

If you're retired or part of a kid-free, two-earner family, you can make do with far less. To get a personalized estimate, see the calculator at

7. If my spouse and I are typical, how much should we plan to spend out of pocket on health care in retirement?

A. $0. That's what Medicare is for.

B. $177,000

C. $240,000

D. $433,000


According to Fidelity Investments, today's average 65-year-old couple will need $240,000 to pay out-of-pocket health care costs in retirement, not including long-term care.

Yet in a Wells Fargo survey of people with $250,000 or more in investable assets, 75% guessed that they would need only $60,000.

If you're already maxing out your 401(k) or IRA, Stifler suggests creating a designated account for health care costs. Separating health savings from other retirement funds will help you keep track of whether you're hitting your goal.

8. I need a will, of course, but I should also look into setting up a trust if I...

A. Am filthy rich.

B. Want to keep my money out of the tax man's hands.

C. Plan to remarry and want to make sure my new spouse doesn't shortchange my children.

D. Have a spendthrift son who's in debt, and I don't want his creditors to get a bite of my assets.

ANSWER: All of the above.

You don't need to be loaded to benefit from a trust, says Ann-Margaret Carrozza, a New York City estate-planning and elder-law attorney.

Irrevocable trusts, which may be changed only by the trustee and beneficiaries, can reduce estate taxes and help protect assets from creditors and lawsuits. They also allow you to specify how your assets will be distributed, should you, say, prefer to dish out the kids' inheritance slowly rather than in a lump.

Interested? Setting up a trust will cost you at least $1,200.