Test Your Knowledge of Financial Basics for PepsiCo Employees?

According to a survey conducted by the National Council on Aging (NCOA) in 2021, 60% of adults aged 60 and older have not yet created a retirement plan. This is surprising given the fact that most individuals in this age group are either close to retirement or have already retired. Creating a retirement plan can help individuals better prepare for the financial challenges that come with retirement, such as healthcare costs and living expenses. With the right plan in place, retirees can maximize their retirement savings and ensure that they have enough money to last through their golden years.

With retirement planning being this important, we have created a test to measure how much you comprehend personal finance. This brief exam will help you evaluate your knowledge of a few fundamentals. Below is a section containing information about our PepsiCo clients to help you learn more.

2. b -- False. Diversification is a sensible investment strategy that helps you manage risk by spreading your investment dollars across a variety of securities and asset classes, but we would like to remind our PepsiCo clients that it cannot completely eliminate risk and cannot guarantee a profit. You continue to risk losing money.

3. c. Numerous employer-sponsored 401(k) plans feature a matching program, which is analogous to receiving free money to invest. If the PepsiCo plan offers a match, you should contribute at least enough to maximize the benefit. Some matching programs impose a vesting schedule, which means that you will gradually acquire the right to the matching contributions and any earnings on those dollars. If you chose option b, you'll notice that this is a bit of a deceptive question. Contributions to traditional 401(k) plans are tax-deferred, but taxes are not eliminated entirely. When you take a distribution from the plan, you will be required to pay taxes on your contributions and any earnings on them. Additionally, distributions taken before age 5912 may be subject to a 10% tax penalty. There are some exceptions.

4. a -- True. The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Share Insurance Fund (NCUSIF), respectively, insure deposits in federally insured banks and credit unions up to $250,000 per depositor, per ownership category (e.g., single account, joint account, retirement account, trust account), per insured institution. Neither the FDIC nor the NCUSIF protects against losses in equities, bonds, mutual funds, life insurance policies, annuities, or municipal securities. They also do not insure safe-deposit box contents or Treasury bill investments.

5. d. Before deciding on a strategy, we recommend that our PepsiCo clients consult a financial professional in order to effectively pursue their long-term objectives. Among other factors, he or she will consider your objectives, risk tolerance, and time horizon when developing a suitable investment strategy for you.

6. c. APR is the abbreviation for annual percentage rate. This is the rate used by credit card, mortgage, and other loan issuers to inform borrowers of the approximate annual cost of borrowing funds, including all fees and costs. The APR differs from the declared interest rate on a loan, which is typically lower than the APR because it does not include fees and other costs. We advise our PepsiCo clients to compare the APRs of various loans in order to make prudent financial decisions. However, when comparing the APRs of fixed-rate loans and adjustable-rate loans for mortgages, exercise caution because the APR does not represent the utmost interest rate the loan may charge.

7. b -- False. Mutual funds pool the capital of numerous investors in a portfolio of securities that are invested in pursuit of a specified goal. Due to this 'diversification,' mutual funds are typically an effective risk management tool. However, we would like to remind our PepsiCo clients that the level of inherent risk in any mutual fund is contingent on the categories of securities it holds. Always choose a mutual fund with care to ensure that its investment objective aligns with your own.

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Read the fund's prospectus carefully, as it contains important information about risks, fees, and expenses, as well as details about specific holdings.

8. b -- False. Although retirement may be decades away, investing for retirement now is a prudent move. This is due to the fact that even small amounts, such as $50 per month, can accumulate due to the power of compounding, which occurs when your returns ultimately earn returns themselves. This means that your money works for you!

9. a. The primary advantage of a Roth IRA is the tax-free retirement income it provides. Contributions are subject to income limitations and are never deductible for tax purposes. Withdrawals are permitted after a five-year holding period, provided they are 'qualified.' A qualified withdrawal is one made after the account holder dies, becomes disabled, or reaches the age of 59 and a half, or when the account holder withdraws up to $10,000 (lifetime maximum) for a first-time home purchase.

10. d. There is no universally accepted definition of what comprises a 'good' credit score because credit scores are calculated differently by different organizations. In general, however, a credit score of 700 or higher would likely reflect favorably on a credit applicant.