Archive for the ‘Financial Fitness Test’ Category

Testing Your Financial Knowledge

Wednesday, March 28th, 2012

You don’t need professional financial advice, right? You know enough to get by.

Well, it is time to test your knowledge or current financial affairs. The following test was developed by the National Center for Financial Education (NCFE) to help you gauge your financial knowledge and how well you are taking advantage of the financial opportunities presented to you.

Answer either: True, False, or Don’t Know

1. The tax Reform Act of 1986 eliminated the tax advantages of real estate investments.

2. Two earner couples can take a deduction up to $3,000 or 7.5%, whichever is greater.

3. Mutual funds only invest in common stocks.

4. Since interest payments on a mortgage are tax deductible, home owners should always itemize instead of taking standard deduction.

5. A tax “deduction” of $1,000 is better than a tax “credit” of $1,000.

6. If an individual is in a 28% federal tax bracket, 28% of their income goes to the federal government.

7. A couple wants to establish an “education account” for their four year old child. If they use the child’s social security number they will not have to pay income tax on the investment’s earnings.

8. An investment which simply “defers” income tax offers no real tax advantage since the tax must be paid eventually.

9. Life insurance is an inflexible contract which offers no investment options, such as stocks or bonds.

10. If you own a mutual fund, outside of an IRA, there is no way you can avoid being taxed on dividends paid.

11. A wife should usually be the “owner” of her husband’s insurance policy to avoid paying federal estate taxes when she collects on the policy.

12. Joint tenancy is the best way for a couple to hold title to property.

13. Since annuities are offered by insurance companies the primary benefit is insurance.

14. An “insured” municipal bond fund has no investment risk.

15. Interest earned in a life insurance policy is always lower than the rate of interest you can earn in a certificate of deposit.

Questions 16-20 – Answer by Circling One Answer

16. Currently, a self-employed individual will contribute what percentage of his or her income towards Social Security?
a. 6.5% b. 7.51% c. 13.02% d. 15.30%

17. If you invest $1,000 for your child or grandchild, age 1, and the yield averages 12%, approximately how much will the investment be worth when the child reaches age 65?
a. $250,000 b. $500,000 c. $1,000,000 d. $1,500,000

18. In fiscal year 1995, the highest federal rate at which income is subject to tax is:
a. 28% b. 31% c. 39.6% d. 36%

19. Currently, corporate employees earning $50,000 will have the following amount contributed to their social security account:
a. $3,312 b. $4,243 c. $7,650 d. $7,848

20. A 45 year old individual would like to retire on $2,000 a month at age 65. Assuming an average inflation rate of 7.2% over the next 20 years, how much income will this individual need each month in retirement to keep pace with inflation?
a. $4,000 b. $6,000 c. $8,000 d. $10,000

FINANCIAL FITNESS SCORING

ANSWERS TO THE QUIZ:

Questions 1 through 15 are all FALSE

16 = d

17 = d

18 = c

19 = c

20 = c

SCORING: Total the number of correct scores and multiply by five. Twenty correct answers = 100%

RATING:

90-100% = Excellent shape

80- 89% = Good shape

70- 79% = Fair shape

60- 69% = Poor shape

How well did you do? Are you still confident in your knowledge of financial affairs?

For professional financial advice, consult the financial advisors at Safe Retirement Solutions by calling 877-268-4086 or visit our website today!

Safe Retirement Solutions’ financial advisers help our clients in all phases of their retirement planning. We help them prepare for a retirement free from financial worries, so that they can enjoy their retirement years. We help to enable our retired clients with the transition of their wealth into a carefree income that will last them a lifetime.

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Sources:

A Financial Fitness Test