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Can You Pass This Financial Literacy Quiz? Most Americans Can’t

Although these questions address fundamental financial issues everyone will face, only 1 in 16 people actually know the answers. Test your retirement readiness with this quickie quiz.

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Are you financially literate?

Would you describe yourself as financially literate? Take this quiz and find out. But be warned: only 6 percent of Americans passed this exam. Sadly, most Americans are never taught how to manage money or save for goals, so achieving financial security is a bigger challenge than it needs to be. Make sure you avoid the 15 mistakes that will ruin your retirement.

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Why become financially literate?

“It’s important to be financially literate because your financial knowledge affects virtually every aspect of your life,” explains Marc Diana, CEO of MoneyTips.com, which helps people achieve their financial goals through tools and education. “Will my income support my family? Do I have enough money to retire? The more you know about finances, the better you can handle debt and manage your savings. A financial mistake, like buying more house than you could afford, could affect your standard of living until the day you die.” Check out these 9 key retirement planning steps you need to take.

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Introducing the tough test

The quiz is from financialengines.com, which serves as a financial advisor to over nine million people across over 700 companies. Their brain-buster covers a wide range of financial literacy topics in just 11 questions. If you feel secure in your financial literacy, take a shot at three of the hardest questions. Don’t say we didn’t warn you! If you want something easier, see if you could pass this elementary school math test.

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Financial literacy quiz question #1

How much will the typical married couple retiring at age 65 spend on out-of-pocket costs for health care throughout retirement (in today’s dollars)?

A. $50,000

B. $100,000

C. $157,000

D. $200,000

E. $266,000

F. $330,000

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Financial literacy quiz answer #1

Did you guess E. $266,000? Just under 7 percent of respondents chose this correct value. If you guessed F. $330,000, don’t feel too bad: Fidelity’s annual estimate jumped to $280,000 in 2018, and their estimates don’t include long-term health care costs—a substantial financial burden if required. See how much health care costs in each state.

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Financial literacy quiz question #2

 If you purchase a bond and interest rates rise, what happens to the price of the bond?

A. It rises

B. It stays the same

C. It falls

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Financial literacy quiz answer #2

Less than 20 percent of respondents knew that the correct answer is C. Bond prices fall when interest rates rise—it’s possible that people who get this wrong may be confusing bond yields (the return an investor receives on bonds) with bond prices. When interest rates rise, new bonds will provide a higher yield than bonds that you purchased earlier at lower interest rates. To sell your bonds that return less, you must drop the price to make them more attractive. Learn more about bonds. And if you’re financial vocabulary is limited, learn the 9 financial planning terms everyone needs to know.

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Financial literacy quiz question #3

A typical 65-year-old man can expect to live, on average, for how many more years?

A. About 10 more years

B. About 15 more years

C. About 20 more years

D. About 25 more years

E. About 30 more years

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Financial literacy quiz answer #3

Social Security Administration data suggests that the average man should expect to live until age 84, so 20 more years is the correct answer. Tack on an extra three years for the average female lifespan. Quiz results show that only 28 percent know how long the average man will live: If you don’t have a good sense of how long you’ll live, how can you feel confident that you won’t outlive your savings? A free Retirement Planner can help you calculate when you can retire without jeopardizing your lifestyle.

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Financial literacy quiz results

So, how did you do? If you answered 2 out of 3 correctly, you passed. In addition to the above topics, the full quiz addresses financial areas like life insurance, Social Security, estate planning, and interest calculations. Find out the 13 retirement facts you need to take seriously

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Test yourself even more

Would you like to take the entire quiz? Check it out here. Allison+Partners Research + Insights team surveyed 1,000 individuals between the ages of 18 and 65 who are employed full-time, part-time or self-employed. For the entire test, the passing rate was set at 60 percent, and only 6 percent of people who took it passed.

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Time to take action

Whether you took the sample questions or the entire test, consider it as a call to action—even if you aced it. Says Marc Diana, “No matter how many questions you missed, take heart in that there are many avenues to pursue to achieve financial literacy. You could speak to a financial advisor, but there are plenty of things you can do for yourself for free. Whether it’s budgeting, retirement planning, preparing for a mortgage, or other financial topics, educate yourself with available online resources. Learn what financial economic terms mean and how they apply to you. Know your credit score and study your credit report for mistakes or fraud.”

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Financial security

The good news? In the same survey, almost half (47.3 percent) of the respondents have a greater sense of financial security now compared to five years ago. The breakdown:

18.2 percent feel much more secure

29.1 percent feel somewhat more secure

31.0 percent feel about the same

18.2 percent feel somewhat less secure

18.2 percent feel much less secure

What about you? Are you feeling more secure? Or were you before taking this test? Brush up on these 19 personal finance tips that you were never taught to learn even more about your finances.