Basic Skills Flashcards
7 cards from real IRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Basic Skills flashcards as text
What is the penalty for withdrawing money from a traditional IRA before age 59½?
Answer: 10% early withdrawal penalty
The IRS imposes a 10% early withdrawal penalty on distributions taken before age 59½, in addition to ordinary income taxes.
Which type of IRA allows you to contribute after-tax dollars and withdraw funds tax-free in retirement?
Answer: Roth IRA
A Roth IRA is funded with after-tax dollars, meaning qualified withdrawals in retirement are completely tax-free.
At what age must traditional IRA owners begin taking Required Minimum Distributions (RMDs)?
Answer: 73
As of the SECURE 2.0 Act, the RMD age was raised to 73 for individuals who turn 72 after December 31, 2022.
Which of the following is NOT a qualifying exception to the 10% early withdrawal penalty?
Answer: Vacation expenses
Vacation expenses are not a qualifying exception; the IRS only allows penalty-free early withdrawals for specific hardship situations.
What happens to a traditional IRA contribution if your income exceeds the deductibility limit and you're covered by a workplace plan?
Answer: The contribution becomes non-deductible
You can still contribute to a traditional IRA, but the contribution becomes non-deductible if income exceeds certain thresholds.
Can a spouse who does not work outside the home contribute to an IRA?
Answer: Yes, through a spousal IRA funded by the working spouse's income
A spousal IRA allows a non-working spouse to contribute up to the normal annual limit based on the working spouse's compensation.
What is the term for the tax strategy of converting a traditional IRA to a Roth IRA in a low-income year?
Answer: Roth conversion
A Roth conversion involves moving funds from a traditional IRA to a Roth IRA, triggering taxes now to enjoy tax-free growth later.