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Retirement Beginner: Introduction to Individual Retirement Accounts (IRAs)

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1.
Premature withdrawals and insufficient distributions from individual retirement accounts may be taxed.
Choose wisely. There is only one correct answer.
True. You can be penalized for them.
2.
Your income never plays a part in how much of your IRA contributions you can deduct from your taxable income.
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False. Your income plays a part if you are also covered by an employer-sponsored retirement plan.
3.
There are conditions under which you can escape paying taxes on your IRA contributions.
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False. Uncle Sam will tax them in the year you put them in or when you take them out.
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.
How much is the penalty on an excess contribution to an IRA?
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6 percent. You will be charged 6 percent of the excess that you contribute.
6.
IRA funds that are rolled over must be done so within _______ days.
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60. If they are not rolled over within 60 days, the funds lose their tax-deferral.
7.
Under which of the following conditions will you be penalized if you withdraw money from your traditional IRA prematurely?
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Buying a car for the first time. This is not allowed.
8.
For married couples filing taxes jointly, as income rises above a certain phase-out point, the deductibility of IRA contributions ________.
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Falls. The higher the adjusted gross income after a certain point, the more the deductibility drops.
9.
If you want to contribute to your IRA for this year, you have until December 31 to do it.
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False. You have until April 15 (or the official tax day) of NEXT year to contribute.
10.
Your ability to tax-deduct your contributions to an IRA is the same whether you are single or whether you are married and filing taxes separately.
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False. The two situations differ based on adjusted gross income and who is covered by an employer retirement plan, and the limits are far apart.