Advanced Financial Literacy Unit #6 Test Review Activity

Multifaceted strategy using tax-advantaged investments and investment accounts to reduce an investor’s tax liability.

• Tax preparation

• Tax management

• Tax filing

• Tax qualification

Check ALL that apply towards about a qualified retirement accounts.

• 2. Defers tax liability on earnings on interest, dividends, and capital gains until investors decide to take possession of these through distributions.

• 1. Some allow you to exempt you from paying taxes on any earnings.

• 1. Includes investments like Muni and U.S. Treasury bonds.

• 2. Allows investors to deduct contributions from their earned income.

Employee pension plans like those provided your teachers at Mansueto are examples of

• 2. defined benefit plans.

• 1. defined contribution plans.

• 1. non-qualified retirement accounts.

• tax-free investments.

Check ALL that apply towards 401(k) plans?

• 1. May include an employer match.

• 1. Employees who leave their employer may rollover their 401(k) plan into a Traditional IRA.

• 1. Account owners must be at least 59 ½ to take penalty-free distributions.

  2. .

• 1. Define benefit plans

 Each response below describes how Traditional IRAs differ from Roth IRAs EXCEPT

• 1. earnings in Traditional IRAs are tax-deferred; in Roth IRAs, they are tax free.

• 1. Required Minimum Distribution ONLY applies to Traditional IRAs.

• 1. both allow for contributions to be deductible

• 1. both have contribution limitations.

Which response BEST defines an annuity?

• 2. Qualified retirement account that allows employers to set aside money in retirement accounts for themselves and their employees.

• 1. A company issues an executive a life insurance policy with employer-paid premiums as a bonus.

• 1. Employer-based accounts which eligible employees may make salary-deferred contributions on a post-tax and/or pre-tax basis.

• 1. A contract between a buyer and an insurance company that provides the buyer with a regular series of payments in return for a lump-sum contribution investment gain.

Investment earnings grow tax-free and withdrawals are tax-free as well.

• Tax deferred

• Tax allowance

• Tax deductible

• Tax exempt

Investment contributions and/or earnings such as interest, dividends or capital gains that accumulate tax free until the investor withdraws and takes possession of them.

• Tax deferred

• Tax allowance

• Tax deductible

• Tax exempt

Money being added to a qualified account.

• Distribution

• Contribution

• Deduction

• Withdrawal

Money being withdrawn or taken out of a qualified account.

• Distribution

• Contribution

• Deduction

• Withdrawal