Final Exam

Personal exemptions for 2018 are

$0

Specialty Funds

1. Asset Allocation Funds 2. Lifecycle Funds 3. Money Market Funds

Tax deduction

reduces your tax by your marginal rate

Risk

the probability or likelihood of an unfavorable event occurring (could lose some or all of your money.)

Money Market Funds (MMFs)

these funds invest only in cash equivalents, such as certificates of deposit, government securities, and other liquid investments, such as commercial paper an investment fund comprised of​ short-term securities designed to generate interest for the shareholders while maintaining a net asset value​ (NAV) of​ $1 per share.

Investing in mutual funds allows you

to take advantage of the large gains that are possible in the stock market, while managing your risk through diversification without having to be super wealthy.

If your retirement savings are not deposited into a qualified account within the 60-day window, it will be

treated as a withdrawal by the IRS and you will owe taxes as if it were income, plus a 10% penalty on the amount.

Standard deduction

$12,000 for Single filers (or Married filers who are filing separately) $24,000 for Married filers (filing jointly) $18,000 for Head of Household filers

Saving

- something you do to achieve your short-term goals first goal of saving is to make sure there is no risk of losing your money. second goal is to earn enough interest to simply keep pace with inflation, if possible. not about making money; it's about safety.

Annual fees, or Management Expense Ratio​ (MER)

1. 12b-1 fees, or operational or marketing expense fees 2. Management fees (somebody has to pay the person managing the mutual fund) 3. Administrative costs (postage, customer service, etc.)

College career plan consists of three components

1. 4W 2. Improve yourself 3. The job of getting a job

Develop your college career plan will allow you

1. Assess where you are 2. See where you want to go 3. See which routes you can take to get there

IRS has a powerful right to (Debt collector for the federal​ government)

1. Audit any individual or business 2. Take a taxpayer to court for fraud or failure to pay taxes owed 3. Shut down businesses that owe taxes

4 ways to manage risk

1. Avoid it: stop something completely by doing something. 2. Reduce it: by discouraging certain types of​ behavior 3. Assume it 4. Transfer (Shift) it: involves someone else sustaining injury or making payment to cover losses from an injury.

Itemized deduction

1. Charitable Gifts 2. Real Estate Taxes Paid 3. Mortgage Interest

Process of investing

1. Check Your Budget 2. Determine What You Can Afford 3. Do your research 4. Compare quality and price 5. Make sure the purchase aligns with your needs

Marketing yourself by:

1. Creating a professional presence in your social media accounts 2. Researching your company job targets 3. Crafting a strong résumé and cover letter 4. Preparing the job application 5. Performing well in the interview process 6. Following-up promptly

Choose to purchase mutual funds or ETFs because

1. Diversification can be reached with very small dollar amounts (as little as $1,000 invested in a mutual fund, for example). 2. Professionals manage the funds. 3. Certain funds allow for specific investment types, such as global investments, investing in particular sectors, certain size companies, etc.

4 types of tax

1. Earnings (income tax) 2. Purchases (sales tax) 3. Property ownership (real estate tax or personal property tax) 4. Wealth (estate, , Inheritance, and Gift Taxes)

An area to improve yourself to boost your career

1. Education 2. Technology 3. Communication 4. Leadership 5. Job experience

Before Calculating and Paying Your Income Tax Expense, you need to know:

1. How much you owe 2. How to minimize what you owe 3. How to avoid penalties 4. How much you will owe next year

2 ways mutual funds increase in value.

1. Interest and Dividends 2. Capital gains

Become a Go-To person

1. Keep your skill-set up to date. 2. Stay on top of the latest technology that is in use in your company. 3. Make sure you know the latest updates to rules and regulations that affect your work. 4. Look for professional development opportunities. 5. Ask to go to conferences as an attendee or presenter. 6. Ask to attend trade shows. Join professional organizations.

Strategies to Minimize Your Taxable Income

1. Maximize your contributions to your 401(k). 2. Contribute funds to a traditional IRA. 3. Maximize your contributions to a qualified health savings account. 4. Deduct your moving expenses if you moved for a new job in the past year. 5. Deduct student loan interest. 6. Deduct tuition and fees or claim an eligible education tax credit, whichever leads to greater tax savings. 7. Review all possible credits for which you may qualify, such as the earned income tax credit and child tax credit.

Disadvantages to investing outside of retirement

1. Missing the match (matching contributions at work/ from employer) 2. Feeling the fees 3.. Tortured by taxes

The "April surprises" to avoid are:

1. Owing a large amount of money because you did not have enough taxes deducted from your paycheck 2. Receiving a large tax refund because you had too much tax money deducted from your paycheck during the year

Advantages of defined contribution plan

1. Portability 2. Matching 3. Direct deposit from paycheck 4. Pre-tax investment 5. Tax-deferred growth

2 basic kinds of risks

1. Pure risk 2. Speculative risk

Calculate what you need in retirement

1. Spending money 2. Adjust your inflation 3. Calculate the lump sum 4. Monthly savings 5. Adjust

Mutual Fund Types

1. Stock Fund 2. Bond Fund 3. Specialty Fund 4. Load funds

Above the line deduction (expenses)

1. Traditional IRA Contributions 2. Tuition and Fees 3. Student Loan Interest 4. Health Savings Account

4W

1. What Do You Want to Do? 2. Where Do You Want to Do It? 3. Who Do You Want to Do It for? 4. Where Do You Want to Be Five Years after Graduation?

Start your evaluation by asking fact-based questions about yourself, such as:

1. What is your performance in class? 2. Do you have the right work experience? 3. Can you demonstrate communication and leadership skills?

Advantages of Roth Retirement Accounts

1. Your budget allows you to fully fund a traditional 401(k), 403(b), or TSP 2. You believe you will be in a higher tax bracket when you retire 3. You do not want to pay taxes on withdrawals in the future

You want to find out as early in your college career as possible what those companies find attractive in new graduates so you can

1. take the necessary classes 2. get the appropriate internship 3. join the right organization

Karlee invested​ $7,000 in XYZ​ no-load mutual fund with a NAV of​ $35. How many shares of XYZ does she​ own?

200 ($7,000 / 35)

What percentage of the time does the market index perform better than a professionally managed mutual​ fund?

75%

Your career is a lifetime journey of making good use of​ your:

A. Time in college. B. knowledge. C. experience. D. skills.

The IRS has a lot of leeway to do what is necessary to force taxpayers to satisfy their tax debt.

A. garnish his wages. B. audit his tax return. C. take him to court for fraud. D. seize his assets.

Tax formula

ATM = 1 - Tax rate Pre-tax earning = Cost / ATM Tax cost = Pre-tax earning * Tax rate After-tax earning = Pre-tax earning - Tax cost /or/ After-tax earning = Pre-tax earning * ATM After-tax interest rate = Pre-tax interest rate x ATM

Taxes on earnings refers​ to:

Federal income​ taxes Social Security​ taxes Medicare​ taxes State income taxes​

What is the term for a load mutual fund where the investor only pays commission when purchasing the mutual​ fund, but not upon selling or redeeming the​ fund?

Front−End Load Funds

Refundable Tax credits

Get the refund even if it is more than the amount you owe in taxes before subtracting for the credit 1. Earned Income (EIC) 2. American Opportunity Tax Credit (AOTC) - partially refundable

Five Rules to Avoid Getting Scammed

If it sounds too good to be true, it is. If you did not initiate the correspondence, don't agree to pay anything. If you have to pay anything to claim your prize, you didn't really win. If you make money from new recruits, think twice before joining. If it comes from another country, leave it there.

Index mutual funds

If you seek an investment that: 1. outpaces inflation 2. allows you to start investing right away 3. charges very low fees

Taxpayer Advocate Service (TAS)

Independent organization within the IRS that helps taxpayers and protects taxpayer rights.

Index Funds

Lower fees, higher return not required to do extensive research of the stocks they are purchasing not incur all those commissions from frequently trading stocks

Diversification

Manage risk and make it your friend smooth up and downs of your investment and lower your risk

Net asset value (NAV)

Measurement of the value of mutual funds

Filing status

Single Head of household Married filing jointly Married filing separately Qualifying widow(er) with dependent child

Investing's truisms

The greater the returns, the more you need to risk

Lifecycle Funds

These funds are designed to mimic risk-based investment strategies over the lifetime of an investor designed to provide a portfolio with an asset allocation mix that steadily gets more conservative as the target date​ approaches; it is also referred to as a target date fund.

Asset Allocation Funds

These funds maintain a specific balance of securities, including stocks, bonds, and cash equivalents such as money market instruments.

Taxable Income

Total Income − Above-the-line deductions = Adjusted gross income (AGI) − Deductions = Taxable income

ETFs vary significantly from mutual funds in terms of:

Trading Tax consequences Fees

Portfolio

a group of financial assets held by an investor such as stocks, bond, real estate, etc.

High turnover ratio

a large percentage of investments are bought or sold in a quick period of​ time?

Low turnover ratio

a large percentage of investments are held for a long period of time

Since you cannot control when a mutual fund will sell shares of stock and earn capital gains, it may be a good tax strategy to choose mutual funds with

a low turnover ratio

The advantage of no-load funds is that

all of your money gets invested.

Nonrefundable tax credit

allow you to subtract up to the amount you must pay in federal income taxes for the year, so your amount owed cannot be less than zero. 1. Lifetime Learning Credit (LLC) 2. Electric Vehicle Credit 3. Foreign Tax Credit

Return

amount or rate that you can expect your money to grow.

Employer-sponsored retirement plan

an IRS-approved retirement plan offered by an employer (also called qualified plans) at little or no cost to the employees

Exchange-traded fund​ (ETF)

an investment fund traded on stock​ exchanges, like individual​ stocks, but designed to provide investors with a return matching a benchmark or index with minimal costs.

Bond index mutual fund

an investment program that pools funds from numerous entities and individuals to purchase a​ large, diversified collection of bonds that mimics or follows a specified bond index.

Stock index mutual fund

an investment program that pools funds from numerous entities and individuals to purchase a​ large, diversified collection of stocks that mimics or follows a specified stock index.

To achieve both your short-term and your long-term goals, you need to be

both a good saver and a good investor.

Mutual Funds means

brings together thousands of small investors and pools together everyone's money

Moving Retirement Accounts

complicated may pay penalties and taxes on the money you withdraw

Defined contribution plan

defined by what is being contributed by your employer, and will base on the type of investments that are chosen

Every organization wants people who are

educated, can communicate well, and can lead a team to complete a task

Rule of 72

estimate how long it takes for your money to double simply by dividing the interest rate (in whole numbers) into 72

1040-A

for those with a slightly more complicated tax situation.

1040-EZ

for those with very basic income and tax situations.

Prices tend to go up over time. Therefore, you want your investments to

go up even faster to avoid losing purchasing power.

Self-directed investing allows her total control over the types of

investments, the frequency of​ trades, and thus the amount of commissions and fees.

One key to successful​ mutual fund investing is to

keep an eye on the fees being charged.

Risk management

long-range, organized, systematic, planned strategy to protect your assets, your family, and yourself.

Investing

making​ money, building​ wealth, achieving​ long-term goals, and increasing purchasing power over time. money kept in a reasonably safe place so that it generates an acceptable rate of return over time involves assuming risk

Audit

more detailed look into the supporting documents and other forms of proof that: 1. You earned the amount you claimed 2. You are eligible for the deductions you claimed

1040

most comprehensive for those eligible for more deductions, such as itemized deductions, or having more forms of income, such as interest income or dividend income.5

No-load mutual funds

mutual fund in which there are no commission charges to buy or sell and which are generally sold directly by the investment company without using a third party such as a brokerage firm​ (which may charge its own sales​ commission)..

Load funds

mutual funds that charge a sales fee or commission

Individual Retirement Account (IRA)

not an investment; it is a type of investment acc​ount. could be composed of stock investments, bond investments, a mutual funds, a certificates of deposit (CDs), or a few other types of investments

Defined Benefit Plan

payments are defined according to # of years you worked, base salary

Managing career by

read books on the topic. attend seminars on the topic. seek out experts on the topic. visit websites on the topic.

Tax credit

reduces your tax dollar for dollar

IRS Publication 17, Your Federal Income Tax for Individuals

summarizes the important changes for the current tax year, explains who must file and why, and answers many other commonly asked questions about individual income tax returns.

Speculative risk

taken by conscious choice where losses or gains are possible

Largest annual household expense is

tax burden

Risk tolerance

the amount of volatility (increase and decrease) an investor is willing to ensure in relation to the value of their investments

Risks

the probability of a negative event happening in our lives. Some risk is unavoidable. Risk is part of our everyday lives. can manage risk and minimize its cost.

By purchasing mutual​ funds, investors can earn market returns while minimizing their​ ___

unnecessary risk

After-Tax Multiplier (ATM)

used to determine after-tax dollars, before-tax dollars, the after-tax rate, and the before-tax rate Formula: ATM = 1- Tax rate

Your attitude

what makes you the luxury edition

Career

what you are going to do throughout your lifetime.

Job

what you do right now to earn a paycheck.

Tipping point

when the investment begins to return as much money in interest as you are investing (where the investment value increases by the amount you are investing)

Pure risk

where no profits are possible but only total loss, partial loss, or break-even (no change) are the only possible outcomes

Investing after

your savings plan is in place and your emergency fund is fully funded