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Retirement Beginner: Introduction to Individual Retirement Accounts (IRAs)

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1.
The IRA deductibility phase-out point for the spouse covered by another employee retirement plan is higher than the one for the non-covered spouse.
Choose wisely. There is only one correct answer.
False. The non-covered spouse has the higher phase-out point, since he or she does not have the benefit of another retirement plan.
2.
Deductible and non-deductible IRAs may be taxed.
Choose wisely. There is only one correct answer.
True. Their taxability depends on many factors, such as whether they were taxed at contribution time.
3.
This year, Jack, who is single, will earn $1,500 from his job. Given how low those earnings are, can he still contribute to his IRA?
Choose wisely. There is only one correct answer.
Yes. As long as he has earned income, he can contribute. However, $1,500 will be the most he will be allowed to contribute.
4.
Your income never plays a part in how much of your IRA contributions you can deduct from your taxable income.
Choose wisely. There is only one correct answer.
False. Your income plays a part if you are also covered by an employer-sponsored retirement plan.
5.
IRA funds that are rolled over must be done so within _______ days.
Choose wisely. There is only one correct answer.
60. If they are not rolled over within 60 days, the funds lose their tax-deferral.
6.
This year Robert, age 40, contributed $1,000 more than the allowed limit to his IRA. How much will he have to pay in penalty taxes?
Choose wisely. There is only one correct answer.
$60. He must pay 6 percent of the excess. Six percent of $1,000 is $60.
7.
The amount of your IRA contributions that you can deduct from your taxable income begins to be phased out at a certain level of income.
Choose wisely. There is only one correct answer.
True. Once you reach a certain level defined by the IRS, your deductibility begins to drop.
8.
Mary is 76 years old and was required to withdraw $8,000 from her traditional IRA last year. She withdrew only $6,000 and did not attempt to correct her mistake. How much of a penalty will she be charged?
Choose wisely. There is only one correct answer.
$500. The penalty (starting in 2023) is one-quarter of what one does not withdraw. Since Mary did not withdraw $2,000, she will be penalized $500.
9.
If some of the contributions to your IRA were deductible and some were not, your withdrawals must be separated accordingly so the proper portions can be taxed.
Choose wisely. There is only one correct answer.
True. What you deducted will be taxed, but what you didn't deduct will not be taxed.
10.
A collection of valuable, vintage, handmade Elvis memorabilia is allowed as an IRA investment.
Choose wisely. There is only one correct answer.
False. Collectibles are not allowed as IRA investments.