by Gordon Powers

Most respondents, admitting they don't feel very comfortable when it comes to dealing with money, want to see personal finance classes become a permanent part of school curricula.

That's a great idea, but it comes a tad late for those who've already left school. Still, if you can come up with a reasonable answer for the following seven questions, you should do all right.

What is the rate of return you'll need to meet your long-term needs? Many people can tell you whether they think their investments are or aren't doing well. But how can they know where they stand if they're not sure what's reasonable over the long haul?

Although you might wish for more, six per cent or seven per cent is all you should really count on, according to long-term data from investing firm Vanguard - and that assumes a reasonable tilt towards stocks.

What portion of your portfolio should be in stocks and bonds? This is a key element in putting together a portfolio. Your answer will have an enormous impact on the results you get, and the way you feel about your investments.

Keep in mind that an asset mix that falls within your comfort zone may in fact not be aggressive enough to meet your goals. Therein lies the tradeoff.

According to FinaMetrica, an Australian company that helps advisers assess client risk tolerance, middle-of-the-road types - and that's a big group - will likely be comfortable with a maximum stock allocation of 56 per cent.

How much risk you can really stomach? Assessing risk is directly connected to asset mix and expected returns. If you get it wrong, you'll end up an emotional mess and find yourself making counterproductive investment decisions as a result.

Don't confuse your willingness to take risk with your capacity to withstand the consequences. If you're easily spooked and will likely sell your stock funds every time they drop 15 per cent or 20 per cent, then don't buy them to begin with.

There are several useful rules of thumb when it comes to risk. One popular idea is that you should be prepared to accept a one-year loss equalling half your stock allocation.

So, if you have 50 per cent of your portfolio in stocks, you should be willing to weather a 25 per cent drop in overall portfolio value in any given year.

FinaMetrica found that most investors overestimate their ability to hang in when markets are falling - so much so that only seven per cent of them could really handle having much more than 70 per cent of their total investments in stocks.

How much you should be saving every year to achieve your goals? A standard guideline is to save at least 10 per cent of your pay. But that assumes you get a very early start or believe you can count on other generous company perks - like a traditional cheque-a-month pension, which is becoming increasingly rare.

Shoot for 15 per cent if you can, particularly if your employer isn't kicking in its share somehow.

What will you need to have put aside by the time you retire? The older you get, the more important this number becomes. It's not hard to get a ballpark figure, but the closer you get to retirement, the more precise your calculations should be.

One guideline is that you should have saved 20 to 25 times the annual income you'll need once you're retired. For example, if you need an income of $40,000 a year, that translates into $800,000 (20 times $40,000).

However, depending on your other retirement income sources, i.e. company and government pensions, or the proceeds from the sale of your house, you might not need nearly that much.

If you've been working for a while, you could receive as much as $14,000 a year from the Canada Pension Plan and Old Age Security payments, for instance.

How much of your current income will you have to replace in retirement? There's a big difference between thinking about living on a certain portion of what you're now making, and figuring out ways to eliminate what could be a sizable chunk of your current expenses.

Aiming to replace 60 to 70 per cent of your income serves as a good rule of thumb, largely because that's what's left over once most people subtract their mortgage costs, which are typically 25 to 30 per cent of income, and the toll of putting kids through school.

How much you can withdraw annually from your investments in retirement? The quick answer is four per cent of your funds, increased each year for inflation. But if you don't understand the variables that go into this, retirement can be an emotional roller coaster ride.

In the original research that discovered the four-per-cent sweet spot, the assumptions were that your money had to last at least 25 years, and that you invested your nest egg in a continually rebalanced 50-50 split between stocks and bonds.

If you aim to retire at say 52 - which means you'll need your money to last more like 30 years - or if you keep just about all your money in bonds, your safe withdrawal rate will be considerably lower.

Internet site reference: http://www.obj.ca/Opinion/2011-09-28/article-2762141/Seven-money-rules-for-retirement/1