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Retirement Beginner: Introduction to Individual Retirement Accounts (IRAs)

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1.
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.
2.
There are conditions under which you can escape paying taxes on your IRA contributions.
Choose wisely. There is only one correct answer.
False. Uncle Sam will tax them in the year you put them in or when you take them out.
3.
If you want to contribute to your IRA for this year, you have until December 31 to do it.
Choose wisely. There is only one correct answer.
False. You have until April 15 (or the official tax day) of NEXT year to contribute.
4.
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.
5.
If you are covered by an employer-sponsored retirement plan, you must use your ________ to figure out how much of your IRA contributions you can deduct from your taxable income.
Choose wisely. There is only one correct answer.
Adjusted gross income. Adjusted gross income determines how eligible you are to deduct your contributions.
6.
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.
7.
How many times per year may an IRA be rolled over?
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Once. This is the present limit.
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.
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.
Choose wisely. There is only one correct answer.
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.
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.