In recognition of National Financial Literacy Month, we’ve crafted a financial literacy quiz and invite all financial advisors and investors to take this 10-question challenge!

(Answers appear at the bottom. See how many you can answer correctly.)

1. What is the age at which Required Minimum Distributions (RMD) from IRAs and employer-sponsored retirement plans must generally begin?

1. 65
2. 5
3. 72
4. 5

2. What is not generally covered under a homeowner’s insurance policy?

1. Cost of defending the insured against a lawsuit for bodily injury or property damage caused by a family member
2. Title fraud
3. Living expenses associated with the loss of a home due to an insured disaster
4. A baseball card collection

3. If an investment loses 25%, how much will it need to gain to reach breakeven?

1. 25%
2. 28%
3. 34%
4. 37%

4. If an individual is trying to decide between making a contribution to a Roth IRA versus a traditional IRA, which of the below is an important consideration.

1. Tax bracket in retirement versus current tax bracket
2. The higher contribution level of a Roth IRA
3. The potential for a higher return in a traditional IRA
4. The potential for a higher return in a Roth IRA

5. What is a qualified charitable distribution (QCD)?

1. Tax-free payments made by a charity to an individual or organization
2. Non-cash grants
3. Direct transfers of funds from an IRA to a qualified charity
4. No such thing exists

6. What is the only uncompensated market risk that can’t be managed through diversification?

1. Single stock risk
2. Sequence of returns risk
3. Interest rate risk
4. Security selection risk

7. A retiree is comfortable with $50,000 in annual income. To maintain their standard of living, how much income will be needed in 15 years if inflation averages 4% per year?

1. $100,204
2. $76,756
3. $89,167
4. $90,047

8. Retirees can choose to delay receiving their Social Security benefit past their normal retirement age. For individuals born after 1942, at what rate does their Social Security payment increase if they wait until age 70 to begin taking Social Security?

1. 7%
2. 5%
3. 8%
4. 5%

9. Medicare pays for which long-term care expense?

1. In-home care
2. Assisted living
3. Memory care
4. Does not pay for long-term care

10. Which of the below is one power not granted under a financial Power of Attorney (POA)?

1. Change the principal’s will
2. Make investment decisions on behalf of the principal
3. Apply for public benefit programs
4. Access a principal’s financial accounts

Answers: 1. C  2. B  3. C  4. A  5. C  6. B  7. D  8. C  9. D  10. A

Scoring Key:

8-10     Financial Superstar

5-7       Above Average

0-4       Have Some Homework to Do

Please reference disclosures: https://blog.americanportfolios.com/disclosures/