CEA Retirement Planning & IRA Estate Strategies 1 ā Questions and Answers
Question 1: Under the SECURE Act 2.0 (effective 2023), at what age must required minimum distributions (RMDs) begin for individuals born between 1951 and 1959?
- 70Ā½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
SECURE Act 2.0 increased the RMD starting age to 73 for individuals born between 1951 and 1959, and to 75 for those born in 1960 or later.
Question 2: Which type of IRA provides tax-free qualified distributions in retirement and can pass income-tax-free to heirs?
- Traditional IRA
- SEP IRA
- SIMPLE IRA
- Roth IRA (Correct answer)
Correct answer: Roth IRA
Roth IRAs are funded with after-tax contributions, and qualified distributionsāincluding to beneficiariesāare completely income-tax-free.
Question 3: Under the SECURE Act (2019), most non-spouse beneficiaries who inherit an IRA must distribute all funds within how many years of the owner's death?
- 5 years
- 10 years (Correct answer)
- 15 years
- 20 years
Correct answer: 10 years
The SECURE Act eliminated the 'stretch IRA' for most non-spouse beneficiaries, requiring full distribution within 10 years of the original owner's death.
Question 4: Which group qualifies as Eligible Designated Beneficiaries (EDBs) under the SECURE Act, allowing them to stretch IRA distributions over their lifetime?
- Adult children of the IRA owner
- Surviving spouses, minor children, and disabled individuals (Correct answer)
- Grandchildren under age 30
- Any family member named as beneficiary
Correct answer: Surviving spouses, minor children, and disabled individuals
EDBs include surviving spouses, minor children of the owner (until age of majority), disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the owner.
Question 5: What is the excise tax penalty under SECURE Act 2.0 for failing to take a required minimum distribution (RMD)?
- 10% of the amount not distributed
- 25% of the amount not distributed (Correct answer)
- 50% of the amount not distributed
- The full undistributed amount becomes taxable immediately
Correct answer: 25% of the amount not distributed
SECURE Act 2.0 reduced the RMD failure penalty from 50% to 25% of the amount that should have been distributed, and further to 10% if corrected within a timely correction window.
Question 6: A Qualified Charitable Distribution (QCD) allows individuals aged 70Ā½ or older to donate directly from their IRA to a charity. What is the annual per-person limit?
- $50,000
- $75,000
- $100,000 (Correct answer)
- $150,000
Correct answer: $100,000
Individuals aged 70Ā½ or older can make QCDs up to $100,000 annually directly from their IRA to qualified charities, which counts toward their RMD and is excluded from taxable income.
Question 7: Which of the following best describes the 'stretch IRA' strategy that was largely eliminated by the SECURE Act for most beneficiaries?
- Converting a traditional IRA to a Roth IRA over multiple years
- Allowing non-spouse beneficiaries to take distributions over their own life expectancy (Correct answer)
- Splitting an IRA into multiple accounts for different beneficiaries
- Rolling an inherited IRA into a new employer retirement account
Correct answer: Allowing non-spouse beneficiaries to take distributions over their own life expectancy
The stretch IRA allowed non-spouse beneficiaries to take minimum distributions over their own life expectancy, potentially deferring taxes for decadesāa benefit eliminated for most beneficiaries by the SECURE Act.
CEA Retirement Planning & IRA Estate Strategies 1
Under the SECURE Act 2.0 (effective 2023), at what age must required minimum distributions (RMDs) begin for individuals born between 1951 and 1959?