Test your knowledge

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Keep studying!

Review your answers below to learn more.

Capital gains on Roth IRAs are _________.

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Tax-free

Tax-deferred

Taxable

Tax-free. As long as you meet the age and waiting-time requirements, dividends and capital gains are tax-free.

You _______ take a tax deduction on the contributions you make to your Roth IRA.

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Can

Cannot

Neither

Cannot. You cannot take a tax deduction on your contributions, but when you withdraw the money for retirement, you also will not be taxed on that money.

A collection of valuable, vintage, handmade Elvis memorabilia is allowed as an IRA investment.

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True

False

False. Collectibles are not allowed as IRA investments.

What is the name for the party that holds funds you contribute to your IRA?

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Transfer agent

Collection agent

Custodian

Bank

Custodian. When holding funds, the party is referred to as a custodian.

Which of the following may fund a Roth IRA?

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A cash value life insurance policy

A vintage Rolls-Royce valued at two million dollars

A bond that does not pay periodic interest

A collection of rare metals

A bond that does not pay periodic interest. This is called a zero coupon bond, and it is allowed as an IRA investment. The others are not.

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