Take the Quiz
Our firm has always promoted financial education and literacy. The need for improvement is displayed by the results of a LIMRA survey asking 2,000 Americans 10 questions about basic financial and retirement topics.
The study found that only one in eight scored 90% correct. More than a third (36%) answered five or fewer questions correctly — with some not even knowing the difference between a stock and a bond. Men scored a little better than women (31% vs. 23% correct responses), but both groups failed miserably. Ditto for older consumers vs. younger ones (40% vs. 21%, with age 55 the separator).
And the most revealing factor? Those who have a financial advisor scored highest on the quiz. So if you want to become smarter about personal finance, get a financial advisor!
Test your knowledge of basic personal-finance issues. Here is LIMRA’s quiz:
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much would you have if you allowed the money to grow?
2. If the interest rate on your savings account were 1% per year and inflation were 2% per year, after one year your money would be able to buy:
a) more than it does today
b) exactly the same as it does today
c) less than it does today
3. Over the last 50 years, which option has provided the highest average growth per year?
a) savings account
b) certificate of deposit
c) insurance policy
d) stock mutual fund
4. A stock fund’s beta rating can best be described as:
a) a measure of relative volatility of the fund vs. the S&P 500 index
b) a measure of relative growth vs. the S&P 500
c) a measure of relative capital outflow of the fund vs. the S&P 500
True or False
5. Buying a single company stock usually provides a safer return than a stock mutual fund.
6. Annuities are financial products that can provide a series of payments to a person that will last as long as he or she lives.
7. If you were to invest $1,000 in a stock mutual fund, it would be possible to have less than $1,000 when you withdrew the money.
8. Roth IRA earnings accumulate tax-free.
9. A person who is 55 in 2019 will be able to collect full Social Security benefits at age 65. (See Editor’s Note below)
10. The IRS currently limits contributions to 401(k) plans for those under age 50 to $19,000 per year. (See Editor’s Note below)
Answers to LIMRA Quiz:
1. D 2. C 3. D 4. A 5. False 6. True 7. True 8. True 9. False* 10. True*
• #9: A person who is 55 in 2019 will be able to collect full Social Security benefits at age 67.
• #10: In 2019 the IRS limits contributions to 401(k) plans for those under 50 to $19,000 per year.