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Invest in the Future: Safe Family Savings Quiz
by Staff
When it comes to offering new services, products and savings strategies, the banking industry in America is always excited about options -- after all, banking is a business like any other. But what's the best way to make your choices? Certainly not based on advertisements and aggressive sales techniques. Taking care of your family in years to come means getting, and staying, informed.

Roth IRAs are popular these days. For those who qualify, they make retirement savings a good deal less scary, both during lead-up and later, during payout. How many U.S. families and households do you think currently own a Roth or traditional IRA?

  • 16 percent own a Roth IRA, while double that (32 percent) own a traditional IRA
  • 34 percent own a Roth IRA, while double that (68 percent) own a traditional IRA
  • 16 percent own a Roth IRA, while half that (8 percent) own a traditional IRA

The difference in taxation for a Roth versus a Traditional IRA is as follows:

  • You contribute pre-tax dollars, incurring current-rate taxes upon distribution.
  • You contribute after-tax dollars and thus are only taxed upon distribution.
  • You contribute after-tax dollars and therefore are never taxed again.

What are the income caps to qualify for a Roth in 2011?

  • To open a Roth in 2011, your income must be less than $200K (single) or $400K (married filing jointly).
  • To open a Roth in 2011, your income must be less than $122K (single) or $179K (married filing jointly).
  • To open a Roth in 2011, your income must be less than $84K (single) or $168K (married filing jointly).

As of 2010, to convert from a tax-deferred [401(k) or traditional IRA] to a tax-free [Roth] retirement account, you must pay tax on:

  • the amount transferred, as capital gains, taxed at your rate for that year
  • the amount transferred, as simple earned income, taxed at your rate for that year
  • no tax at conversion -- the total is simply taxed upon distribution of the mature account

If you think taxes will increase, or that you'll be in a higher bracket at retirement, the best choice for a retirement fund is:

  • A Traditional IRA is good for a deduction, which offsets the eventual taxation.
  • Funds in a Roth IRA have already been taxed once, and are thus more reliable down the road.
  • A Traditional IRA provides better options and limits on contributions.

The IRS has designated certain Required Minimum Distributions (RMDs) for many retirement accounts, meaning that once you hit a certain age, you must start withdrawing from the account -- and much of the time, this is taxable income. In this context, a Roth IRA is:

  • Like any retirement fund, withdrawals are still taxable -- a Roth IRA just has different limits on how much you withdraw.
  • A Roth owner does not have to take RMDs, and his heirs do not pay taxes on theirs.
  • A Roth owner does not have to take RMDs, however his heirs do, and they will be taxed.

New credit card laws require that companies disclose the following:

  • how long the current balance will take to pay off, at the minimum payment
  • how much you must pay monthly to take care of the balance in one, two or three years
  • all of the above

Was/is this true? Credit card companies are allowed to assess finance charges on the previous cycle, even when a customer has paid in full the following month, a practice known as "double-cycle" billing.

  • still true
  • no longer true
  • never true

Why is it called a "Roth" IRA?

  • It was developed by a financial company as an alternative to traditional IRAs, and named for one of its creators at the company.
  • It was created by the government to help rebuild retirement funds during the mid-1990s recession, and named after one of its champions in the Senate.
  • Like "Fannie Mae" and "Freddie Mac," "Roth" originally comes from a government acronym.

Recent credit card law changes include the following:

  • Credit card issuers will no longer be able to set early morning or other arbitrary deadlines for payments.
  • Cutoff times before 5 p.m. on due dates will be illegal under the new law.
  • all of the above

Traditional IRAs currently cut off contributions at the age of 70.5. Roth IRAs:

  • allow you to contribute until your actual retirement, which is not dependent on age
  • allow you to contribute for life, but after retirement age those contributions are taxed
  • allow you to contribute for the remainder of your life

Expect fees or other penalties if you make savings withdrawals or transfers in excess of:

  • four transfers or withdrawals from savings in a month
  • six transfers or withdrawals from savings in a month
  • 12 transfers or withdrawals from savings in a month

When consumers have accounts that carry different interest rates for different types of purchases (cash advances, purchases, ATM withdrawals), payments over the minimum due must be allocated to:

  • balances as chronologically incurred
  • balances with higher interest rates first
  • balances with higher principal first

Of the 2.4 million Americans who died in 2001, how many were subject to the estate tax?

  • 15 percent
  • 10 percent
  • 2 percent

For those few families in the estate-tax bracket, what happens to capital gains when they inherit?

  • The taxable value of an inheritance is rendered and taxed as a capital gain.
  • The taxable value of an inheritance is calculated based on the current value, zeroing out any capital gain.
  • The value of an inheritance is averaged over the previous ownership, like a capital gain, but taxed differently.

True or false: Short of leaving everything to charity or to a spouse, there is no way to avoid the estate tax if one is subject to it.

  • False: Numerous loopholes are available.
  • True: The estate tax affects so few families that there are no real loopholes in the law.

Myth or reality: The estate tax is known to destroy family farms and small businesses.

  • Myth: This is propaganda to make the ultra-rich appear as though they are protecting small businesses, rather than destroying them.
  • Reality: In addition to a small number of ultra-rich business dynasties, the tax targets lower-income people.

True or false: Due to online banking and the popularity of electronic conveniences, banks now automatically pay your overdrawn and NSF purchases for a fee, unless you ask them not to.

  • True: This is one of the few loopholes left unclosed by the recent law changes.
  • False: The comprehensive overhaul of credit and banking practices addressed many of these corrupt procedures.

In the case of jumping income tax brackets and rates, how will your higher income be taxed?

  • In your new bracket, your total taxable income (after deductions etc.) is taxed at the new rate.
  • Your income is taxed at the old rate, up to the amount that intrudes (that which is "marginal," in other words, above your old rate) into the next bracket.
  • The amount changes depending on other factors and can't be simply determined as a flat bracket rate.

True or false: Renting a home is throwing away money. A mortgage is a much better investment, because it includes ownership and equity.

  • True: It's a clich√© for a reason.
  • False: Nothing is ever that simple.