Test Your Knowledge of Financial Basics for Encompass Health Employees?

How well do you, as a Encompass Health employee, understand personal finance? The following brief quiz can help you gauge your knowledge of a few basics. We've provided an answer section for our Encompass Health clients below including details to help you learn more!

Answers

1. d.  Although it's conventional wisdom to set aside three to six months' worth of living expenses in a liquid savings vehicle, such as a bank savings account or money market account, the answer really depends on your own situation. If your job with Encompass Health is secure and (for our Encompass Health clients who are married) your spouse's job is fairly secure, and you have other assets, you may need as little as three months' worth of expenses in emergency savings. On the other hand, if you're a business owner in a volatile industry, you may need as much as a year's worth or more to carry you through uncertain times.

2. b -- False.  Diversification is a sound investment strategy that helps you  manage  risk by spreading your investment dollars among different types of securities and asset classes, but we'd like to remind our Encompass Health clients that it cannot  eliminate  risk entirely, and it cannot guarantee a profit. You still run the risk of losing money.

3. c.  Many employer-sponsored 401(k) plans offer a matching program, which is akin to receiving free money to invest. If Encompass Health's plan offers a match, you should try to contribute at least enough to take full advantage of it. Some matching programs impose a vesting schedule, which means you will earn the right to the matching contributions and any earnings on those dollars over a period of time. If you selected b as your answer, you'll note this is a bit of a trick question. Although income taxes are deferred on contributions to traditional 401(k)s, they are not eliminated entirely. You will have to pay taxes on those contributions, and any earnings on them when you take a distribution from the plan. In addition, distributions taken prior to age 59½ may be subject to a 10% penalty tax. Some exceptions apply.

4. a -- True.  Deposits in federally insured banks and credit unions are insured by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Share Insurance Fund (NCUSIF), respectively, 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 stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, nor do they insure items held in safe-deposit boxes or investments in Treasury bills

Featured Video

Articles you may find interesting:

5. d.  To adequately pursue your long-term goals, we suggest our Encompass Health clients consult with a financial professional before choosing a strategy. He or she will take into consideration your goals, risk tolerance, and time horizon, among other factors, to put together a strategy that's appropriate for your needs.

6. c.  APR stands for annual percentage rate. This is the rate that credit card, mortgage, and other loan issuers use to show borrowers approximately how much they are paying each year to borrow funds, taking into account all fees and costs. The APR differs from a loan's stated interest rate, which is typically lower than the APR because it does not take into account fees and other costs. We suggest that our Encompass Health clients compare the APRs on different loans to help make smart financial decisions. However, when it comes to mortgages, use caution when comparing the APRs of fixed-rate loans and adjustable-rate loans, because APRs do not represent the maximum interest rate the loan may charge.

7. b -- False.  Mutual funds combine the money of many different investors in a portfolio of securities that are invested in pursuit of a stated objective. Because of this 'diversification,' mutual funds are typically a good way to help manage risk. However, we'd like to remind our Encompass Health clients that the level of risk inherent in any mutual fund depends on the types of securities it holds. You should always choose a mutual fund carefully to make sure its objective aligns with your own investment goals.

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 your retirement from Encompass Health now is a smart move. That's because even small amounts--say just $50 per month--can add up through the power of compounding, which is what happens when your returns eventually earn returns themselves. This means your money goes to work for you!

9. a.  The primary benefit of a Roth IRA is that it provides tax-free income in retirement. Contributions are subject to income limits and are never tax deductible. Withdrawals may be made after a holding period of five years, provided they are 'qualified.' A qualified withdrawal is one made after the account holder dies, becomes disabled, or reaches age 59½, or one in which the account holder withdraws up to $10,000 (lifetime limit) for a first-time home purchase.

10. d.  Because different organizations calculate credit scores based on varying factors, there is no single agreed-upon definition of what constitutes a 'good' score. Generally, though, a score of 700 or above would likely reflect favorably on someone applying for credit.