TA K E AWAY
Test Your Financial Smarts
April is Financial Literacy Month, when educators promote efforts to improve Americans’ understanding of taxes,
saving, credit and more. Think you’re already savvy about your finances? Take our quiz to find out.ILLUSTRATION BY ØIVIND HOVLAND- If you don’t owe taxes, you
won’t be penalized for filing your
federal income tax return after
Ta x D a y.
True False
- How high must your FICO
credit score be for you to qualify
for the best interest rates?
A. 600 C. 700
B. 650 D. 750
- If a 25-year-old investor
deposits $100 a month in a
mutual fund with an annualized
return of 10%, 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?
A. $150 C. $475
B. $225 D. $800
- You and your spouse bought
a house for $100,000 in 2000
and sold it for $500,000 this
year. How much will you owe in
capital gains taxes?
A. $100,000
B. $60,000
C. $0
D. A credit score in the mid 700s 2: 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. 1:C. The saver who starts at 25 would deposit a total of $48,000 of his own money; the procrastinator would need to 3: will usually allow you to qualify for the best rates.C. As long as they’ve owned the house and lived there for at least two out of the past five years, 4: come up with $142,000 out of pocket to have the same amount at age 65.False. There is no law limiting the number of 529 plans you can invest in to save for a college 5: married couples can exclude up to $500,000 in home-sale profits from taxes.D. You can deduct up to $2,500 a year of interest paid on student 7: D. Unlike traditional IRAs, you never need to take required distributions from Roth IRAs. 6: education.B. As interest rates go up, newer bonds come to market paying higher 8: loans, regardless of whether you itemize deductions, as long as you meet certain income thresholds.interest yields than older bonds that investors own, making the older bonds worth less.ANSWERS
- When do you need to start
taking required minimum dis-
tributions from Roth IRAs?
A. When you retire
B. At age 72
C. At age 70½
D. Never- Which of these expenses
can you write off on your fed-
eral tax return if you don’t
itemize?
A. Charitable contributions
B. Medical expenses
C. Mortgage interest
D. Student loan interest- When interest rates rise,
bond prices
A. Rise
B. Fall
C. Stay the same- You can invest in only one 529
college-savings plan per child.
____ True ____ False