Choose wisely. There is only one correct answer to each question.
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1.
Imagine that you just retired. If your living expenses are $30,000 a year now, how much will you need to maintain your current standard of living 20 years from now?
More than $30,000. Because of inflation, it is a good chance you will need much more in 20 years to maintain your current lifestyle.
2.
Retirees will always need less money to live on than working people.
False. Health problems and lifestyle changes may increase a persons income needs in retirement.
3.
When calculating your future retirement income needs, you must consider inflation.
True. After you have adjusted for inflation, you will have a true picture of the amount of income available for living purposes.
4.
Over a long period, inflation reduces what a person with a fixed income can afford to buy.
True. Financial planners suggest that you begin saving for retirement as early as possible to offset the effects of inflation.
5.
Compounding helps your money grow quickly because ________.
It allows you to earn money on earned interest and on principal. The extra growth is made possible by the phenomenon of interest being earned on interest.