Choose wisely. There is only one correct answer to each question.
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1.
Which factor determines whether you should hold stocks or bonds in your tax-deferred accounts?
Both time horizon and current and expected tax brackets play a part. The higher your tax bracket in retirement and the shorter your time horizon until retirement, the more you are likely to benefit from holding stocks in taxable accounts and bonds in tax-deferred accounts.
2.
Holding your stocks in a Roth IRA can provide you with tax-free withdrawals.
True. The key word here is 'can.' As long as you meet the requirements, you can take your withdrawals tax-free.
3.
Stock funds with very lower turnover ratios would do best in _______.
A taxable account. The low turnover rate would make them fairly tax friendly to a taxable account.
4.
Susan has 25 years until retirement. She's in the 31% tax bracket and expects to be in the 28% bracket once she retires. What should she do?
Place stocks in her tax-deferred accounts and bonds in her taxable account. Susan is at least 15 years away from retiring and she expects to be in a lower tax bracket upon retirement. As such, she should hold stocks in her tax-deferred accounts and bonds in her taxable account.
5.
David has 10 years until retirement. He's in the 28% tax bracket now and expects to be in the 31% tax bracket once he retires. What should he do?
Place bonds in his tax-deferred accounts and stocks in his taxable account. Because David is less than 15 years away from retiring and he expects to be in a higher tax bracket upon retirement, he should hold stocks in his taxable account and bonds in his tax-deferred accounts.
