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1.
Pre-tax investments shelter your current income from taxation.
True. The income you invest in pre-tax investments either has no tax withheld or is tax-deductible.
2.
A reasonably intelligent person who studies the tax code from time to time can probably make good decisions about how to shelter investment income from taxes.
False. Even the simplest workplace retirement plan can have tax implications that require expert advice.
3.
Investments in which earnings are allowed to build tax-free are called ______.
Tax-deferred. Tax-deferred investments are those in which earnings are allowed to build tax-free until you receive them as income.
4.
Interest paid on dividends, bonds, and bank accounts is generally taxable.
True. Interest paid on dividends, bonds, and bank accounts is generally taxable as income.
5.
A tax-sheltered account always protects your investment interest from taxes.
False. A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.