Cwmc Module 19: Investment & Retirement Competency Test
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Which of the following terms does NOT pertain to retirement investments?
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Mutual funds
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Load
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No-load
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Load-Bearing Wall
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Front-end load
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This quiz is part of LFE Institute's CWMC (Certified Workplace Money Coaching) course. It will test your proficiency in the Investment & Retirement Module (Module 19) of the program. The questions are all multiple choice, and are designed to be a review of this Module. Let LFE know when you've successfully completed this test and are ready to begin the See morenext Module.
Correct answers required for passing grade: 13/15
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- 2.
What questions should be asked when interviewing a potential investment advisor? (check all that apply)
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What credentials does your spouse have?
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Have you been convicted of a felony or seriously reprimanded by the SEC or governing body of your field?
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What military service background, if any, do you have?
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How are you compensated?
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May I have names of other clients and the amount you are investing for them?
Correct Answer(s)
A. Have you been convicted of a felony or seriously reprimanded by the SEC or governing body of your field?
A. How are you compensated?Explanation
The two questions that should be asked when interviewing a potential investment advisor are: "Have you been convicted of a felony or seriously reprimanded by the SEC or governing body of your field?" and "How are you compensated?". These questions are relevant as they help assess the advisor's integrity, ethics, and potential conflicts of interest. The first question ensures that the advisor has a clean record and has not been involved in any serious misconduct. The second question provides insight into how the advisor is compensated, which is important in understanding if their interests align with the client's goals.Rate this question:
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- 3.
Which of the following is NOT the correct definition for the corresponding advisor designation?
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CPA: Certified Public Accountant
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PFS: Personal Financial Specialist (CPAs who specialize in the financial planning area)
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CFP: Certified Financial Planner
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CLU: Controlled Legal Underwriter (Insurance agent)
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CFA: Chartered Financial Analyst
Correct Answer
A. CLU: Controlled Legal Underwriter (Insurance agent)Explanation
The correct definition for the corresponding advisor designation is CLU: Chartered Life Underwriter (Insurance agent).Rate this question:
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- 4.
When meeting an advisor for the first time, an investor should consider it a "red flag" if the advisor:
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Explains risk tolerance clearly so that the client understands it
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Asks about the investments the client currently has
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Makes an immediate recommendation to save the client time
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Discusses the pros and cons of maxing out a 401(k) plan before investing in other investment options
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Clarifies the client’s financial goals
Correct Answer
A. Makes an immediate recommendation to save the client timeExplanation
When meeting an advisor for the first time, it is considered a "red flag" if the advisor makes an immediate recommendation to save the client time. This is because a responsible and trustworthy advisor would take the time to understand the client's financial situation, goals, and risk tolerance before making any recommendations. Making an immediate recommendation without proper assessment may indicate that the advisor is more focused on making a quick sale or may not have the client's best interests in mind. It is important for an advisor to gather all necessary information and tailor recommendations to the individual client's needs.Rate this question:
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- 5.
To reduce repetitive or redundant words in Money Coaching responses, Money Coaches can find valuable synonyms by using:
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A thesaurus
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Financial Advisor's Desk Reference
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A Blue Book
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Bartlett’s Famous Quotations
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The World Almanac
Correct Answer
A. A thesaurusExplanation
Money Coaches can find valuable synonyms by using a thesaurus. A thesaurus is a reference book that provides alternative words or phrases with similar meanings. By using a thesaurus, Money Coaches can enhance their responses by using different words that convey the same message, making their coaching sessions more effective and engaging. This tool can help them avoid repetitive or redundant language and improve the overall clarity and impact of their communication with clients.Rate this question:
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- 6.
A primary goal in CWMC Module 19 Investments & Retirement is learning how to explain financial terms and strategies ________ .
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To prepare employees for a possible career in finance
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As defined in Webster’s or other accessible dictionaries
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In language that every employee can understand
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In the proper font, size and formatting
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None of the above
Correct Answer
A. In language that every employee can understandExplanation
The primary goal in CWMC Module 19 Investments & Retirement is to learn how to explain financial terms and strategies in language that every employee can understand. This suggests that the module aims to make complex financial concepts accessible and comprehensible to individuals with varying levels of financial knowledge and expertise. By using clear and simple language, employees can better understand and apply these terms and strategies in their work or personal financial planning.Rate this question:
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- 7.
Which of the following would NOT be considered a common annuity term or type?
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Fixed Annuity
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Legislative Annuity
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Variable Annuity
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Immediate Annuity
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Equity-Index Annuity
Correct Answer
A. Legislative AnnuityExplanation
A legislative annuity is not considered a common annuity term or type because it is not a recognized category of annuity. The other options listed - fixed annuity, variable annuity, immediate annuity, and equity-index annuity - are all well-known and commonly used types of annuities in the financial industry. A legislative annuity does not fit into any of these categories and is not a commonly used term in the context of annuities.Rate this question:
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- 8.
Which of the following is generally true?
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Class A shares are sold with an up-front sales charge
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Class B shares are sold without an up-front sales charges but carry higher annual expenses for a fixed period
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Class 529 shares were created to help investors save for higher education expenses through a tax-advantaged account
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All of the above are true
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None of the above are true
Correct Answer
A. Class 529 shares were created to help investors save for higher education expenses through a tax-advantaged accountExplanation
Class 529 shares were created to help investors save for higher education expenses through a tax-advantaged account. This means that investors can contribute to a 529 account and the earnings on those contributions will grow tax-free as long as the funds are used for qualified higher education expenses. This provides a way for individuals to save for education expenses in a tax-efficient manner.Rate this question:
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- 9.
If retired employees do not have enough money saved to live comfortably during retirement, they can stretch their retirement dollars through which of the following strategies? (check all that apply)
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Continue to work as long as possible during their retirement years
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Find a less expensive area with lower cost-of-living, taxes, housing, and healthcare costs
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Consider a reverse mortgage to generate additional living income after age 70–75
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Downsize the cost of their home and car, and eliminate as many long-term debts until they are absolutely needed
Correct Answer(s)
A. Continue to work as long as possible during their retirement years
A. Find a less expensive area with lower cost-of-living, taxes, housing, and healthcare costs
A. Consider a reverse mortgage to generate additional living income after age 70–75
A. Downsize the cost of their home and car, and eliminate as many long-term debts until they are absolutely neededExplanation
Retired employees who do not have enough money saved can stretch their retirement dollars by continuing to work as long as possible during their retirement years. This allows them to earn additional income and delay tapping into their retirement savings. They can also find a less expensive area with lower cost-of-living, taxes, housing, and healthcare costs, which helps reduce their overall expenses. Considering a reverse mortgage after age 70-75 can generate additional living income by utilizing the equity in their home. Downsizing the cost of their home and car, and eliminating long-term debts until absolutely needed can also help reduce expenses and stretch their retirement funds.Rate this question:
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- 10.
Which of the following basic strategies should an employee consider when investing?
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Avoid emotional investing
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Invest heavily in company stock if the employee has inside information and knows they are doing well
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Invest in Life Cycle funds, fixed investments, balance funds, and a fixed income investment; this is a good way to diversify
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Time the market by watching the news everyday and react accordingly; it’s the safest way to invest for the long term
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All of the above
Correct Answer
A. Avoid emotional investingExplanation
Emotional investing refers to making investment decisions based on emotions rather than sound financial analysis. It is important for employees to avoid emotional investing because it can lead to impulsive decisions and potentially negative financial outcomes. Instead, employees should focus on making rational investment decisions based on thorough research and analysis. By avoiding emotional investing, employees can improve their chances of achieving their investment goals and maximizing their returns.Rate this question:
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- 11.
Which of the following can be a good strategy for handling the money in a company 401(k) when an employee leaves the company?
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Withdraw the money and pay down high-interest credit card debts
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Use the money to buy a new home if housing values are low; it’s one of the safest investments over the long term
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Leave the money in the current employer if the plan is doing well
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Have the employer write a check for the balance in the account and use the 60-day time period to find a good IRA option
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All of the above could be good strategies
Correct Answer
A. Leave the money in the current employer if the plan is doing wellExplanation
Leaving the money in the current employer if the plan is doing well is a good strategy because it allows the money to continue growing in a tax-advantaged account. If the plan is performing well, it is likely to provide a good return on investment. This strategy also avoids any penalties or taxes that may be incurred by withdrawing the money early. Additionally, it allows the employee to maintain the convenience of having all their retirement funds in one account.Rate this question:
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- 12.
What are the drawbacks of investing in annuities? (check all that apply)
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High commissions
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Significant early withdrawal penalty
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Does not grow tax deferred like a 401(k)
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Can only invest $5,000/year if the investor is under the age of 50
Correct Answer(s)
A. High commissions
A. Significant early withdrawal penaltyExplanation
Investing in annuities has several drawbacks, including high commissions and significant early withdrawal penalties. High commissions can eat into the overall returns of the investment, reducing the potential gains. Additionally, annuities often come with a significant early withdrawal penalty, which means that if the investor needs to access their money before a certain period of time, they will face a substantial financial penalty. These drawbacks make annuities less attractive compared to other investment options. However, the statement about annuities not growing tax deferred like a 401(k) is incorrect, as annuities do offer tax-deferred growth. The statement about the maximum investment limit of $5,000/year for investors under the age of 50 is also incorrect, as there is no such limit for annuities.Rate this question:
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- 13.
Which of the following factors or strategies should an employee consider when investing for retirement? (check all that apply)
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The employee’s age, specifically, how many years until retirement
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The employee’s risk tolerance
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If the employee is under the age of 50, he/she should have at least 50% in equity funds
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The employee should be conservative; he/she can’t afford to invest retirement dollars in anything that could lose value
Correct Answer(s)
A. The employee’s age, specifically, how many years until retirement
A. The employee’s risk toleranceExplanation
An employee should consider their age and how many years until retirement because this will determine their investment time horizon and the appropriate level of risk they can take. The employee's risk tolerance is also important as it will determine the type of investments they should choose.Rate this question:
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Current Version
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Apr 17, 2024Quiz Edited by
ProProfs Editorial Team -
Jul 17, 2009Quiz Created by
Alice Whinnery
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