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Portfolios 204: Primer to Individual Retirement Accounts

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1.
The traditional individual retirement account has all of the following characteristics except for ______.
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Contributions that are never tax-deductible. They can be if certain conditions are met. It is the Roth IRA whose contributions are never deducted from taxable income.
2.
You _______ take a tax deduction on the contributions you make to your Roth IRA.
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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.
3.
Capital gains on Roth IRAs are _________.
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Tax-free. As long as you meet the age and waiting-time requirements, dividends and capital gains are tax-free.
4.
Which of the following is not allowed to fund an IRA?
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Cash value life insurance. Neither this nor collectibles are allowed as IRA investments.
5.
Which of the following may fund a Roth IRA?
Choose wisely. There is only one correct answer.
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.