Strategy Intermediate: Avoiding Taxes at Retirement

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1.
Earned income includes retirement and Social Security benefits.
Choose wisely. There is only one correct answer.
False. The income you get from working is called earned income. Retirement and Social Security benefits are unearned income.
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.
The tax penalty for early withdrawal from your IRA account is 10 percent.
Choose wisely. There is only one correct answer.
True. This penalty is meant to discourage you from taking out your money before the allowed time.
4.
Which of the following is not true about a joint annuity?
Choose wisely. There is only one correct answer.
It pays any estate taxes on the taxable amount. It is recommended that an insurance policy be used in conjunction with the annuity to cover taxes.
5.
Your minimum required retirement distribution will be higher if you use the joint life expectancy of you and a younger spousal beneficiary in the calculation.
Choose wisely. There is only one correct answer.
False. Using the joint life expectancy of you and a spousal beneficiary who is 10 or more years younger lowers your minimum required retirement distribution.