Financial Advisor Retirement Planning for Financial Advisors 1 — Questions and Answers
Question 1: For 2024, what is the maximum employee elective deferral contribution limit for a 401(k) plan?
- $19,500
- $22,500
- $23,000 (Correct answer)
- $25,000
Correct answer: $23,000
For 2024, employees can defer up to $23,000 into a 401(k) plan, with an additional $7,500 catch-up contribution allowed for those aged 50 and older.
Question 2: At what age must traditional IRA account holders begin taking Required Minimum Distributions (RMDs)?
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
Under the SECURE 2.0 Act, the RMD starting age was raised to 73 for individuals who turn 72 after December 31, 2022.
Question 3: A Roth IRA conversion requires the converted amount to be:
- Included in ordinary income in the year of conversion (Correct answer)
- Tax-free if the original IRA is at least 5 years old
- Subject to a 10% early withdrawal penalty only
- Spread over 5 years for tax purposes
Correct answer: Included in ordinary income in the year of conversion
The amount converted from a traditional IRA to a Roth IRA is included in ordinary taxable income in the year of conversion.
Question 4: Which type of employer retirement plan allows employees to make pre-tax contributions and employers to make matching or profit-sharing contributions?
- Defined benefit pension plan
- SEP-IRA
- 401(k) plan (Correct answer)
- 457(b) plan
Correct answer: 401(k) plan
A 401(k) plan allows employees to make pre-tax (or Roth after-tax) elective deferrals and enables employer matching or profit-sharing contributions.
Question 5: What is the primary advantage of a Roth IRA over a traditional IRA for long-term retirement planning?
- Higher contribution limits
- Immediate tax deductions for contributions
- Tax-free qualified withdrawals in retirement (Correct answer)
- No income limits for contributions
Correct answer: Tax-free qualified withdrawals in retirement
Roth IRA qualified withdrawals (after age 59½ and a 5-year holding period) are completely tax-free, including all investment growth.
Question 6: Which retirement plan is most commonly used by self-employed individuals and allows the highest contribution limits?
- SIMPLE IRA
- SEP-IRA
- Traditional IRA
- Solo 401(k) (Correct answer)
Correct answer: Solo 401(k)
A Solo 401(k) allows self-employed individuals to contribute as both employee and employer, potentially contributing up to $69,000 (2024) plus catch-up, the highest limit available.
Financial Advisor Retirement Planning for Financial Advisors 1
For 2024, what is the maximum employee elective deferral contribution limit for a 401(k) plan?