NAB Personal Finance Planning 4

Question 1

What is the primary tax advantage of a traditional 401(k) plan?

Accepted Answer

Contributions reduce taxable income in the year they are made

Answer

Traditional 401(k) contributions are made pre-tax, reducing your taxable income in the current year; taxes are paid upon withdrawal.

Question 2

How does a Roth IRA differ from a traditional IRA in tax treatment?

Accepted Answer

Contributions are after-tax; qualified withdrawals are tax-free

Answer

Roth IRA contributions are made with after-tax dollars, and qualified distributions in retirement are completely tax-free.

Question 3

What is 'asset allocation' in investment planning?

Accepted Answer

Dividing investments among asset classes like stocks, bonds, and cash

Answer

Asset allocation is the strategy of distributing investments across different asset classes to balance risk and return.

Question 4

A 30-year-old investor's portfolio should typically be MORE aggressive than a 60-year-old's primarily because:

Accepted Answer

Younger investors have more time to recover from market downturns

Answer

A longer investment horizon allows time to ride out market volatility, making higher-risk, higher-return assets more appropriate for younger investors.

Question 5

What is the annual contribution limit for a Health Savings Account (HSA) for an individual in 2024?

Accepted Answer

$4,150

Answer

In 2024, the IRS HSA contribution limit for self-only coverage is $4,150.

(NAB) National Australia Bank Practice Test

(NAB) National Australia Bank Practice Test

NAB Personal Finance Planning 4