AnswersFinancial MathIndividual Retirement Plans

Individual Retirement Plans — Quiz Answers

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1
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Which disadvantage belongs to a traditional IRA?

A
mandatory employer contributions
B
contributions are not tax-deductible
C
early withdrawals may be subject to taxes, penalties
D
no investment options
2
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Which key advantage is part of a Roth IRA?

A
Contributions are tax-deductible.
B
There are no income limits for contributions.
C
Employers make contributions on behalf of employees.
D
Earnings grow tax-free, and qualified withdrawals are tax-free.
3

A 37 year-old writer withdraws $⁢4,000 from a traditional IRA. The withdrawal qualifies under the IRS first-time homebuyer exception. How will this withdrawal be treated for tax purposes?

A
no penalty and no taxes
B
no penalty and taxed as regular income
C
400 dollars penalty and no taxes
D
400 dollars penalty and taxed as regular income
4

A 30 -year-old small-business owner withdraws $⁢10,000 from their Roth IRA, which they have held for 4 years, to cover medical expenses exceeding 10% of their adjusted gross income. What are the taxes and penalties on this withdrawal?

A
no taxes or penalties
B
no penalty and taxed as ordinary income
C
1 dollars comma 000 penalty and taxed as ordinary income
D
1 dollars comma 000 penalty and no taxes
7

A 52 -year-old individual nearing retirement withdraws $⁢20,000 from their traditional IRA to pay for a first-time home purchase. What are the taxes and penalties on this withdrawal?

A
2 dollars comma 000 penalty and taxed as ordinary income
B
no penalty and taxed as ordinary income
C
no penalty and no taxes
D
1 dollars comma 000 penalty and taxed as ordinary income
8

Which advantage belongs to a Roth IRA?

A
no contribution limits
B
tax-free withdrawals in retirement
C
employer-matching contributions
D
tax-deductible contributions
9

A 60 -year-old individual nearing retirement withdraws $⁢15,000 from their traditional IRA to pay for college expenses for their dependent child. What are the taxes and penalties on this withdrawal?

A
1 dollars comma 500 penalty and no taxes
B
no penalty and no taxes
C
no penalty and taxed as ordinary income
D
1 dollars comma 500 penalty and taxed as ordinary income

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