Certified Senior Advisor (CSA) Practice Test

Elective contributions to 401(k) accounts represent a proactive approach to both savings and investments aimed at securing financial stability in retirement. When individuals allocate a portion of their income to a 401(k), they are investing in their future, often benefiting from employer matching contributions as well as tax advantages. This practice not only reflects savings, as it sets aside funds from current income, but also qualifies as an investment since the money contributed is typically invested in various financial instruments such as stocks, bonds, or mutual funds, with the expectation of growth over time.

In contrast, paying rent, buying groceries, and paying for health insurance are all necessary expenses that do not contribute to savings or investment growth. While these expenditures are essential for daily living, they do not create any long-term financial benefits or increase an individual's wealth. Therefore, the act of contributing to a 401(k) is distinctly categorized as savings and investments, as it serves the dual purpose of setting aside money for future use and potentially generating returns.