74% of Americans can't answer this question about retirement

Cece and Schmidt on FOX's "New Girl"
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It turns out there's a lot of confusion when it comes to preparing for retirement.

When Fidelity Investments conducted a retirement IQ test consisting of eight questions, respondents scored an average of 30 percent. The dismal results could help explain why so many Americans have little to no savings.

Here's one of Fidelity's questions that tripped up nearly three-quarters of respondents: Roughly how much do many financial experts recommend people save by the time they retire?

  1. About 2-3 times the amount of your last full-year income
  2. About 4-5 times the amount of your last full-year income
  3. About 6-7 times the amount of your last full-year income
  4. About 8-9 times the amount of your last full-year income
  5. About 10-12 times the amount of your last full-year income
Retirement in America is changing rapidly

The correct answer is 5, or at least 10 times the amount of your last full year's income. Only 26 percent of the 2,000 respondents answered correctly, meaning 74 percent underestimated how much is needed.

"Furthermore, 25 percent of respondents expected to only need to save two-to-three times the amount of their last full year income, a number that is well below suggested/estimated targets," Fidelity reports.

How do you get to ten times your income in savings?

The simplest starting point is to contribute to your 401(k) plan if your employer offers one. If you don't have a retirement savings plan at work, you can contribute to other tax-advantaged accounts designed specifically for retirement, such as a traditional IRA, Roth IRA or myRA.

The most important things to do with your money before 30

No matter the retirement savings vehicle you choose, the most important step is to open an account. Next, follow these three steps so your money can grow over time:

1. Contribute as much of your income as possible. Most experts recommend setting aside 10% or more.

2. Automate your contributions. Have your employer do a payroll deduction or have your money taken out of your checking account and sent straight to your retirement account. After all, you can't spend money you never see.

3. Get in the habit of upping your savings consistently, either every six months, at the end of each year or whenever you get a pay raise. Again, if you make this automatic by setting up "auto-increase," you won't forget to up your contributions (or talk yourself out of setting aside a larger chunk).

Need some inspiration? Check out:

How this couple saved over $1 million in retirement savings to retire by 43