That's exactly what it does. The theory is that you're in a higher tax bracket now than you will be when you retire so you'll pay less taxes on the money, hence the tax shelter. Plus, that tax free money grows tax free as well. Sounds like a tax shelter to me. It never said you avoid paying all taxes.
Do you Actually Understand Money?
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That's exactly what it does. The theory is that you're in a higher tax bracket now than you will be when you retire so you'll pay less taxes on the money, hence the tax shelter. Plus, that tax free money grows tax free as well. Sounds like a tax shelter to me. It never said you avoid paying all taxes.
100%.
But I doubt if more than 10% of americans can answer a single one of those without using luck...
And yeah, the 401k is one of the best tax shelters the little people have access to at all... Growing you money tax free is a huge, huge advantage for them that somehow they mostly can't grasp anyway...
Edit: BTW; I don't use any of this shit. Stocks and precious metals are far better an investment than any of this peon shit.
But I doubt if more than 10% of americans can answer a single one of those without using luck...
And yeah, the 401k is one of the best tax shelters the little people have access to at all... Growing you money tax free is a huge, huge advantage for them that somehow they mostly can't grasp anyway...
Edit: BTW; I don't use any of this shit. Stocks and precious metals are far better an investment than any of this peon shit.
Quiz Completed
Compare your score to the average for people in your age group in a recent nationwide survey:
Age:
25-29: 53%
30-34: 61%
35-39: 63%
40-44: 64%
45-49: 64%
50-54: 62%
55-59: 61%
60-64: 61%
65-69: 57%
70-74: 50%
75-79: 41%
80-84: 33%
85-89: 27%
90+: 13%
You scored 100%!
I do sorta discuss most of this stuff for a living though (series 6/63 & insurance license)...
Compare your score to the average for people in your age group in a recent nationwide survey:
Age:
25-29: 53%
30-34: 61%
35-39: 63%
40-44: 64%
45-49: 64%
50-54: 62%
55-59: 61%
60-64: 61%
65-69: 57%
70-74: 50%
75-79: 41%
80-84: 33%
85-89: 27%
90+: 13%
You scored 100%!
I do sorta discuss most of this stuff for a living though (series 6/63 & insurance license)...
You guys would be surprised how many time I go to open a checking account for a customer and if they are between the ages of 18-30 a typical first question is ,
"Whats the difference between a checkingS account and savings account?" I explain then it is usually followed up with. . .
"Oh. . . Okay I will get a savings account with a debit card. . . ."
me:
then I explain again. . ..
"a Checking accout is for spend monies. . . . savings account is for saves monies"
customer thinking:
then I simply say okay we will open the savings with debit card as I proceed to open their checking account that will soon enough be over drafted (the crazy thing is, it's ten times harder to explain how they spend more money than they have in their "savings account"!
FYI I live/work in a nice suburb that is middle/upper middle class.
"Whats the difference between a checkingS account and savings account?" I explain then it is usually followed up with. . .
"Oh. . . Okay I will get a savings account with a debit card. . . ."
me:
then I explain again. . ..
"a Checking accout is for spend monies. . . . savings account is for saves monies"
customer thinking:
then I simply say okay we will open the savings with debit card as I proceed to open their checking account that will soon enough be over drafted (the crazy thing is, it's ten times harder to explain how they spend more money than they have in their "savings account"!
FYI I live/work in a nice suburb that is middle/upper middle class.
90% -- only missed the mortgage one 'cause I've never dealt with that stuff and won't for a long time.
Agree that it's pretty easy--I'm sad the average is that low.
Agree that it's pretty easy--I'm sad the average is that low.
scored 70% but I am not American the three or so questions had to do with American type retirement funds. I prefer my super annuation account better. It's basically the same thing but it is compulsory for every worker.
What you are saying proves that you don't completely understand the principle behind a 401k.
While it's true it doesn't shelter you completely from taxation. The purpose of it all is you get to withdraw the money from your 401k at the moment you choose. Example, say you are currently making 50k, you are currently being taxed in your respective tax bracket which differs from country to country, state to state, etc. Lets say in your country/state you are being taxed 30% when you make between 40k to 75k, 20% when you make 20k to 39k and 10% when you make 10k to 19k. This year you decide to put 10k in your 401k. You will have 3k less to pay in taxes this year. (10k * 30%) Now lets say you retire at 60 years old and you don't have an income anymore, you will be using 100% of your 401k money (lets assume there is no inflation to simplify things and that you've been adding money to your 401k every year). In principle at your retirement you will need way less money to live than when you were working, most likely your house will be paid off and you wont have to pay gas for going to work everyday, etc... So if you withdraw 39k per year when you retire you will be taxed 20% of that amount ($7,800). To put it simply, if the 401k would not have sheltered you from taxation, you would have been taxed 30% of that amount ($11,700). So at you retirement, you will be saving $3,900 in taxes every year. There is a lot more complexities behind it but just understand that you will most likely save a lot of money with a 401k, and I haven't even talked about the interest you will gain in it.
The question asked "Which type of mortgage would allow a first-time home buyer to qualify for the highest loan amount?
Adjustable rate mortgages are always cheaper than fixed rates mortgages to start. The price can go up or down based on what rates are doing (thus less risk for the owner of the paper). So you can always qualify for a higher loan amount.
Same.
Although the quiz title is inaccurate. It should be called "Do you understand financial products?"
The two aren't the same - very few people (including financial advisors) actually understand money.
80% - I disagree with the credit card one though. It's not as cut and dried as "annual interest rate vs annual fees".
If you are always paying your balance in full the annual fees are frequently more costly than the annual interest rate. You will pay some interest but it's going to be a fraction of what you'd pay if you were carrying a balance.
This is especially true when you are turning over volume on your CC and instead of paying the bill every month you are paying it every week as I've seen a few people here mention. I do this myself.
The interest you'll pay is potentially low; the fees are a fixed cost. They are both important. And if you have a premium/higher end credit card you will be paying annual fees.
So in short - I can see it going both ways.
If you are always paying your balance in full the annual fees are frequently more costly than the annual interest rate. You will pay some interest but it's going to be a fraction of what you'd pay if you were carrying a balance.
This is especially true when you are turning over volume on your CC and instead of paying the bill every month you are paying it every week as I've seen a few people here mention. I do this myself.
The interest you'll pay is potentially low; the fees are a fixed cost. They are both important. And if you have a premium/higher end credit card you will be paying annual fees.
So in short - I can see it going both ways.
