Strategy Intermediate: Avoiding Taxes at Retirement

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1.
During retirement, withdrawing too little from your retirement account will lead to a _______ tax penalty.
Choose wisely. There is only one correct answer.
25 percent. Withdrawing too little from your retirement account will lead to a 25 percent tax penalty on the difference between the required minimum distribution and the amount you actually withdrew. Prior to 2023, the penalty was 50%.
2.
Which of the following would most likely lower your taxes owed when you take retirement plan distributions?
Choose wisely. There is only one correct answer.
Taking distributions in a year when you have a lot of tax deductions. Having deductions can lower your tax burden, so this may be a good time to take your distributions.
3.
To lower your minimum required retirement distribution, you can use only the joint life expectancy of you and your spouse.
Choose wisely. There is only one correct answer.
True. You can use only the joint life expectancy table for you and a spouse who is 10 or more years younger as beneficiary to lower your minimum required distribution.
4.
If your income is below $32,000, your Social Security benefits will not be taxed.
Choose wisely. There is only one correct answer.
False. It depends on your filing status. If your income is above $25,000 (single) and $32,000 (joint), your Social Security benefits can be taxed at 50 to 85 percent.
5.
An annuity is a contract with a life insurance company.
Choose wisely. There is only one correct answer.
True. An annuity can be bought only from an insurance company.