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Finance Flashcards

Personal Finance Chapter 3

pre-tax means the government allows you to invest money after taxes are taken out false
ESAs are a good way to save for college true
the Roth IRA is an after-tax investment that grows tax free true
once you have a fully funded emergency fund, put 10% of your income into retirement plans false
the contribution amount for a Roth IRA in 2008 is $5,000 true
457 plans are designed for employees of non-profit organizations such as hospitals and schools false
if your money is in a pre-tax retirement plan, you will pay taxes on it when you cash it out true
never roll over your 401(k) when you leave a company false
you should save for college using saving bonds false
pension plans only work if you participate in them. If you put nothing in, you will get nothing out. false
a retirement plan for self-employed people SEPP
a deferred compensation plan 457
typical retirement plan found in most companies 401(k)
retirement plan found in non-profit groups (schools, hospitals) 403(b)
save for college by first using this type of account educational savings
used after you max out the ESA UTMA
movement of tax-deferred retirement money from one plan to another rollover
invest 15% of income for retirement Baby Step 4
manager of a child’s UTMA account until he or she reaches age 21 custodian
college funding Baby Step 5
the company Jason works for matches his 401(k) contribution up to 5%. Jason takes advantage of this and contributes $200 per month. At the end of one year, how much money will be in his account? $4,800
If your company does not provide any type of 401(k) match, what is the best investment option? Invest the maximum amount allowed in a Roth IRA, and then go back and fund the 401(k) to complete 15% of your income
what definition best explains an IRA? the tax treatment on virtually any type of investment
which is an advantage of a Roth IRA? All of the above: offers more choices, grows tax free, higher bracket at retirement
the primary difference between the roth IRA and a traditional IRA is: The Roth IRA grows tax free; the traditional IRA doesn’t
Under which condition are you not able to make a tax-free withdrawal from your Roth IRA? major career change and temporary drop of income
what is the best option for your retirement plan when you leave a company? Do a direct transfer into an IRA
If you borrow against your retirement plan, under which conditions must you pay it back? All of the above: if you leave the company voluntarily, if you are forced to leave the company, you die
if you have $3,000 invested in a Roth IRA, what is true about your contribution? You have already paid taxes on the money, so it will grow tax free
which of the following are good ideas to save for college? ESA
order the following investment steps according to priority 1) Fully funded emergency fund2) 15% income into Roth IRAs and pre-tax retirement3) ESA4) Build wealth

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