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
Which IRA type is specifically designed for self-employed individuals and small business owners?
Answer: SEP IRA
A SEP (Simplified Employee Pension) IRA allows self-employed individuals and small business owners to contribute up to 25% of compensation.
What does it mean to 'roll over' an IRA?
Answer: Transfer funds from one retirement account to another
A rollover moves funds from one retirement account to another, typically without triggering taxes if done correctly within 60 days.
How many IRA rollovers are you allowed to perform in a 12-month period?
Answer: One
The IRS limits taxpayers to one indirect (60-day) IRA rollover per 12-month period across all IRAs combined.
What is an 'inherited IRA'?
Answer: An IRA received from a deceased person's estate
An inherited IRA is one that is passed to a beneficiary upon the death of the original IRA owner.
Which of the following investments is generally NOT allowed inside an IRA?
Answer: Collectibles like coins and artwork
The IRS prohibits holding collectibles such as artwork, rugs, antiques, gems, stamps, and most coins inside an IRA.
What is the 'backdoor Roth IRA' strategy used for?
Answer: Allowing high-income earners to contribute to a Roth IRA indirectly
The backdoor Roth involves making a non-deductible traditional IRA contribution and then converting it to a Roth, bypassing income limits.
Which statement about Roth IRA withdrawals is correct?
Answer: Contributions can be withdrawn anytime tax- and penalty-free
Roth IRA contributions (not earnings) can be withdrawn at any time without taxes or penalties since the money was already taxed.