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Tax-Reduction Strategies Q&A Quick Test Question #1: One disadvantage of a custodial account is that money in it: A. Is usually taxed at a higher rate. B. Is considered when qualifying for educational aid. C. May be withdrawn by the child at any age. D. Earns a lower rate of return and consequently not as much money will be available for college. Question #2: If George is in the 25% federal marginal tax bracket: A. He is not subject to state income taxes. B. His tax bracket will be lowered between now and 2006, assuming taxable income remains the same. C. All of his income is taxed at a rate of 25%. D. He is not a candidate for tax-free municipal bonds. Question #3: Tax-qualified plans: A. Provide tax savings in the year of contribution. B. Allow funds to accumulate tax-deferred. C. Provide a systematic investment plan that enables you to "pay yourself first." D. All of the above. Question #4: Which of the following is not true of municipal bonds? A. They are safer than other types of bonds. B. They are especially beneficial to people in higher tax brackets. C. Their proceeds are applied "for the public good." D. They are exempt from federal and often from state income taxes. Question #5: Roth IRAs: A. Provide a tax deduction in the year of contribution. B. Allow funds to grow tax-deferred to age 55. C. Have maximum contribution limits of $4,000 in 2006 and 2007, increasing to $5000 in 2008. D. Are subject to minimum mandatory distributions at age 70½. AIG VALIC is the marketing name for the family of companies comprising VALIC Financial Advisors, Inc.; VALIC Retirement Services Company; VALIC Trust Company; and The Variable Annuity Life Insurance Company (VALIC); members of American International Group, Inc. < PREVIOUS NEXT > #40101