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1.
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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
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.
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.
4.
Investments in which earnings build tax-free until you withdraw them are called _______.
Tax-deferred. "Tax-deferred" means that earnings build tax-free until you withdraw them.
5.
_______ are taxed at a relatively low rate if you hold your investments long enough.
Capital gains. Long-term capital gains are taxed at a lower rate to encourage investment.