Investment Tax-Advantaged Investing 2

Question 1

What is a Health Savings Account (HSA) in the context of investing?

Accepted Answer

A tax-advantaged account for medical expenses that can also serve as a long-term investment vehicle

Answer

A government subsidy for low-income medical expenses

Answer

A flexible spending account that must be used within the plan year

Answer

An insurance product that pays for hospital stays

Question 2

What is required to contribute to an HSA?

Accepted Answer

You must be covered by a High-Deductible Health Plan (HDHP)

Answer

You must be enrolled in Medicare

Answer

You must be self-employed with no other coverage

Answer

You must be age 55 or older

Question 3

What is a 529 plan?

Accepted Answer

A tax-advantaged savings plan designed to encourage saving for future education costs

Answer

A retirement savings account for government employees

Answer

A tax-deferred annuity sold by insurance companies

Answer

A small-business retirement plan with higher contribution limits

Question 4

What does 'vesting' mean in the context of a 401(k) employer match?

Accepted Answer

The period of time an employee must work before gaining full ownership of employer-contributed funds

Answer

The process of choosing investments within a 401(k)

Answer

The annual fee charged by the 401(k) plan administrator

Answer

The automatic increase in employee contributions each year

Question 5

What is a Roth 401(k)?

Accepted Answer

A 401(k) plan option that allows after-tax contributions so qualified withdrawals are tax-free

Answer

A 401(k) plan only available to Roth IRA holders

Answer

A 401(k) plan with no contribution limits offered by some employers

Answer

A self-directed 401(k) that invests only in index funds

Question 6

What is a Required Minimum Distribution (RMD)?

Accepted Answer

The mandatory annual withdrawal that the IRS requires from most retirement accounts starting at age 73

Answer

The minimum amount required to open a retirement account

Answer

The minimum employer match required by law in a 401(k)

Answer

The minimum investment needed to qualify for tax-deferred growth