# 5 Proven Ways to Have 25% More Retirement Money

When it comes to making money, everyone wants a short cut. Just google "get rich quick" and you'll see thousands of answers promising an easy solution to financial freedom.

But, what if I told you that the National Bureau of Economic Research—with professors from the University of Pennsylvania, George Washington University, and North Carolina State University—released a study that promises just that: An easy solution to get rich quick.

Don't believe me?

The study, titled "Financial Knowledge and 401(k) Investment Performance", found that people with a higher financial knowledge see greater long-term investment gains.
Those with the highest level of knowledge gained an average 9.5% per year while those with the least gained just 8.2%.

While a 1.3% gap may not seem like much, that adds up to more than 25% over a 30 year career. Talk about more financial freedom.

How did the study assess an individual's financial knowledge? By asking 5 simple questions:

1. Interest Rate: Suppose you had \$100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? More than \$110, Exactly \$110, Less than \$110

2. Inflation: Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year.

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After 1 year, how much would you be able to buy with the money in this account? More than today, Exactly the same , Less than today

3. Risk: Is this statement True or False? Buying a single company’s stock usually provides a safer return than a stock mutual fund. True, False

4. Tax Offset: Assume you were in the 25 percent tax bracket (you pay \$0.25 in tax for each dollar earned) and you contributed \$100 pretax to an employer’s 401(k) plan. Your take-home pay (what’s in your paycheck after all taxes and other payments are taken out) will then: Decline by \$100, Decline by \$75, Decline by \$50, Remain the same

5. Match: Assume that an employer matched employee contributions dollar for dollar. If the employee contributed \$100 to the 401(k) plan, his account balance in the plan including his contribution would: Increase by \$50, Increase by \$100, Increase by \$200, Remain the same

So, how did you do?

The research showed that few Americans can answer even just the first three questions correctly.

"The first measures people’s ability to do a simple interest rate calculation," the study says. "The second tests people’s understanding of inflation; and the third is a joint test of knowledge about 'stocks' and 'stock mutual funds' as well as risk diversification, since the correct response requires the respondent to know what a stock is and that a mutual fund is comprised of many stocks."

Here are the correct answers by the way:

1. More than \$110
2. Less than today
3. False
4. Decline by \$75
5. Increase by \$200

Knowing the answers to these five questions has a fairly direct correlation to having 25% more money when you retire. It's one "get rich quick" idea that actually works.
Published on Oct 12, 2016
By Ryan Vanzo
Ryan Vanzo is the Digital Business and Finance Editor at WebFinance Inc, which runs InvestorGuide.com, InvestorWords.com, and BusinessDictionary.com. You can reach him at ryan@investorguide.com

Copyrighted 2020. Content published with author's permission.