Quiz | April 2011
The Personal Finance Quiz
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If you're a visitor to Kiplinger.com or a subscriber to Kiplinger's Personal Finance magazine, you take your money and your finances seriously. So how much do you really know about taxes, saving, investing, managing credit and other vital matters of your personal finance?
Here's your chance to put your knowledge to the test. Our 12-question quiz offers valuable insights for everyone, novices and experts alike. See how your knowledge compares with other quiz takers, and learn as you answer our fun and informative queries.
Here's your chance to put your knowledge to the test. Our 12-question quiz offers valuable insights for everyone, novices and experts alike. See how your knowledge compares with other quiz takers, and learn as you answer our fun and informative queries.
Quiz
The Personal Finance Quiz
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Question 1 of 12
If you don't owe taxes, you won't be penalized for filing your federal income tax return after April 15.
A. True
B. False
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Quiz
The Personal Finance Quiz
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Question 1 of 12
If you don't owe taxes, you won't be penalized for filing your federal income tax return after April 15.
You're right! A. True is correct.
Sorry, wrong!
is incorrect.
The right answer is A. True.
The penalty for missing the filing deadline is a percentage of the tax owed with the return. If the IRS owes you, there is no penalty. Taxpayers who have refunds coming really don't have to worry about the deadline. Of course, the sooner in the year you file, the sooner you'll get your tax return in your pocket.
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Quiz
The Personal Finance Quiz
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Question 2 of 12
Are contributions to a traditional 401(k) plan deducted from your salary before or after taxes?
A. Before
B. After
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Quiz
The Personal Finance Quiz
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Question 2 of 12
Are contributions to a traditional 401(k) plan deducted from your salary before or after taxes?
You're right! A. Before is correct.
Sorry, wrong!
is incorrect.
The right answer is A. Before.
Your traditional 401(k) contributions are made before taxes, reducing the amount of income Uncle Sam can get his hands on. Because 401(k)s are tax-deferred investment plans, you don't pay taxes on earnings now, but you will have to pay when you withdraw your money in retirement. If your boss offers a Roth 401(k) and you contribute, you put in after-tax dollars, but all contributions and their earnings come out tax free in retirement.
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Quiz
The Personal Finance Quiz
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Question 3 of 12
Investing in a load fund is more expensive, but performance is better than no-load funds over the long term.
A. True
B. False
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Quiz
The Personal Finance Quiz
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Question 3 of 12
Investing in a load fund is more expensive, but performance is better than no-load funds over the long term.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
A load is a sales charge levied by the fund. If you invest $1,000 in a fund with a 4% load, for example, only $960 goes to work for you; the other $40 goes to the fund, often to be passed on to an adviser who sold the fund. Studies have shown that, on average, load funds perform no better than the cheaper no-load funds. In fact, when you include the cost of the load, they may even under-perform over time.
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Quiz
The Personal Finance Quiz
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Question 4 of 12
How high must your FICO credit score be for you to qualify for the best interest rates?
A. 600
B. 650
C. 700
D. 750
E. 800
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Quiz
The Personal Finance Quiz
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Question 4 of 12
How high must your FICO credit score be for you to qualify for the best interest rates?
You're right! D. 750 is correct.
Sorry, wrong!
is incorrect.
The right answer is D. 750.
A credit score in the mid-700s usually will allow you to qualify for the best rates (27% of adults have scores from 750 to 799). This numerical summary of how much you owe and how promptly you pay your bills affects not only your ability to get a loan -- and at what interest rate -- but also can play a role in how much you'll pay for insurance and might even influence your chances of getting a job.
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Quiz
The Personal Finance Quiz
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Question 5 of 12
You can invest in only one 529 college savings plan per child.
A. True
B. False
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Quiz
The Personal Finance Quiz
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Question 5 of 12
You can invest in only one 529 college savings plan per child.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
There is no law limiting the number of 529 plans you can invest in to save for a college education. Sometimes investing in more than one is a good idea.
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Quiz
The Personal Finance Quiz
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Question 6 of 12
Overseas stocks are hot. You change your allocation from 10% to 80% of your portfolio.
A. Smart move
B. What was I thinking?
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Quiz
The Personal Finance Quiz
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Question 6 of 12
Overseas stocks are hot. You change your allocation from 10% to 80% of your portfolio.
You're right! B. What was I thinking? is correct.
Sorry, wrong!
is incorrect.
The right answer is B. What was I thinking?.
Chasing big returns is often a losing game because the good times don't last forever. You'd have to know the right time to sell -- but no one knows for certain when a sector's had its run. The best investing strategy is a well-diversified one.
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Quiz
The Personal Finance Quiz
Question 7 of 12
You and your spouse bought a house for $100,000 in 2000 and sold it for $500,000 this year. It was your primary residence. How much will you owe in capital-gains taxes?
A. $100,000 ($400,000 profit x 25% tax rate)
B. $60,000 ($400,000 profit x 15% tax rate)
C. $0
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Quiz
The Personal Finance Quiz
Question 7 of 12
You and your spouse bought a house for $100,000 in 2000 and sold it for $500,000 this year. It was your primary residence. How much will you owe in capital-gains taxes?
You're right! C. $0 is correct.
Sorry, wrong!
is incorrect.
The right answer is C. $0.
As long as you've owned the house and lived there for at least two out of the past five years, married couples can exclude up to $500,000 in home-sale profits from taxes ($250,000 for single filers).
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Quiz
The Personal Finance Quiz
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Question 8 of 12
A health savings account is ...
A. The same as a flexible spending account
B. An insurance plan
C. A way to save for health costs if you have a high-deductible insurance plan
D. A plan under Medicare
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Quiz
The Personal Finance Quiz
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Question 8 of 12
A health savings account is ...
You're right! C. A way to save for health costs if you have a high-deductible insurance plan is correct.
Sorry, wrong!
is incorrect.
The right answer is C. A way to save for health costs if you have a high-deductible insurance plan.
Health savings accounts allow Americans under age 65 to make tax-deductible contributions to a special account tied to a high-deductible health insurance policy. Earnings inside the HSA are tax deferred (just like in an IRA). Money from the HSA can be used tax- and penalty-free to pay the insurance policy deductible, co-payments and any other qualifying expenses. Money left in the account at the end of a year can be rolled over to the next year.
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Quiz
The Personal Finance Quiz
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Question 9 of 12
If an investor age 25 deposits $100 a month in a mutual fund with an annualized return of 10% a year, he'll have about $640,000 at age 65. If he waits until age 40 to start saving, how much will he have to deposit each month to have the same amount at age 65? (Hint: It's a hefty sum.)
A. $150
B. $225
C. $475
D. $800
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Quiz
The Personal Finance Quiz
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Question 9 of 12
If an investor age 25 deposits $100 a month in a mutual fund with an annualized return of 10% a year, he'll have about $640,000 at age 65. If he waits until age 40 to start saving, how much will he have to deposit each month to have the same amount at age 65? (Hint: It's a hefty sum.)
You're right! C. $475 is correct.
Sorry, wrong!
is incorrect.
The right answer is C. $475.
This shows the incredible power of compounding -- the power of money making money for you. The saver who starts at 25 would deposit a total of $48,000 of his own money; the procrastinator would need to come up with $142,000 out of pocket to have the same amount at age 65.
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Quiz
The Personal Finance Quiz
Question 10 of 12
When do you need to start taking required minimum distributions from Roth IRAs? (Hint: Think outside the box.)
A. When you retire
B. At age 65
C. At age 70
D. By April 1 of the year after the year you turn 70½
E. Never
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Quiz
The Personal Finance Quiz
Question 10 of 12
When do you need to start taking required minimum distributions from Roth IRAs? (Hint: Think outside the box.)
You're right! E. Never is correct.
Sorry, wrong!
is incorrect.
The right answer is E. Never.
Unlike traditional IRAs, which require you to take your first required minimum distribution by April 1 of the year after the year you turn 70½, you never need to take required distributions from Roth IRAs.
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Quiz
The Personal Finance Quiz
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Question 11 of 12
Which of these expenses can you write off on your federal tax return if you don't itemize?
A. Charitable contributions
B. Medical expenses
C. Mortgage payments
D. Moving expenses
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Quiz
The Personal Finance Quiz
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Question 11 of 12
Which of these expenses can you write off on your federal tax return if you don't itemize?
You're right! D. Moving expenses is correct.
Sorry, wrong!
is incorrect.
The right answer is D. Moving expenses.
If a new job is more than 50 miles farther away from your old house than your old job was, then you can deduct the cost of getting yourself, your family and your positions to the new location. You can claim this tax saver regardless of whether you itemize deductions.
Note: Qualifying self-employed taxpayers can deduct the cost of their medical insurance even if they claim the standard deduction.
Note: Qualifying self-employed taxpayers can deduct the cost of their medical insurance even if they claim the standard deduction.
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Quiz
The Personal Finance Quiz
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Question 12 of 12
All income from mutual funds is subject to state income tax.
A. True
B. False
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Quiz
The Personal Finance Quiz
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Question 12 of 12
All income from mutual funds is subject to state income tax.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
Some income paid by mutual funds gets a state-income-tax break, just like income from government securities does. That’s because some money market mutual funds invest heavily in U.S. government obligations, so a substantial portion of the income they pay during the year is state tax-free.
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Quiz
The Personal Finance Quiz
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