General Education Development (GED) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the GED Exam. Test your skills with a dynamic quiz featuring diverse questions and detailed explanations. Sharpen your preparation and excel in your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Frank has $40,000 in retirement funds earning 5% annually. If he wants to increase his chances of retiring comfortably with a $10,000 bonus, what should he do?

Put it in his retirement account
Put it in his savings account
Use half to pay down his mortgage and save the other half
Use all of it to pay down his credit card debt

The correct answer is: Use all of it to pay down his credit card debt

Frank has $40,000 in retirement funds earning 5% annually, and he is looking to increase his chances of retiring comfortably with an additional $10,000 bonus. If he chooses to use all of his retirement funds to pay down his credit card debt, this can significantly reduce interest expenses, which often have much higher rates than the 5% he is earning on his retirement account. Paying off credit card debt can lead to increased financial stability and peace of mind. Credit cards often charge annual percentage rates that can exceed 15-20%, and by eliminating this debt, Frank will free up future income that can be allocated toward his retirement or other savings goals. The money that would have gone toward credit card payments can be redirected into his retirement account or left available for necessary expenses. Moreover, reducing debt can improve Frank's credit score, enabling him to secure better interest rates for future loans and improve his financial health overall. By prioritizing paying down high-interest debt, he is effectively creating a more favorable financial situation for his retirement, which aligns with his goal of retiring comfortably.