FREE IRA Basic Skills Question and Answers
True or False: Married individuals who file jointly with their spouse may combine their IRA assets into a jointly funded spousal IRA.
Explanation:
False: A jointly funded spousal IRA does not exist (although there is a spousal IRA). The IRA funds of a married couple cannot be merged in one account.
True or False: While Roth IRAs offer tax benefits in retirement, traditional IRAs offer tax benefits now.
Explanation:
True: Traditional IRAs are "pre-taxed," which means that contributions are tax deductible, but withdrawals are subject to taxation. Contributions to a Roth IRA are made post-tax, which means that you pay taxes today but can receive earnings tax-free in retirement.
True or False: Anyone can make contributions to an IRA, regardless of their income level.
Explanation:
False: There are IRA income limits that phase out Roth contributions and tax deductions (Traditional).
True or False: You are allowed to make contributions to both a Traditional IRA and a Roth IRA in the same year.
Explanation:
It's true that you can make contributions to both a Traditional IRA and a Roth IRA in the same year.
True or False: To qualify for the Retirement Savings Contribution Credit, you must make IRA contributions.
Explanation:
False: To be eligible for the Retirement Savings Contribution Credit, you must contribute to an employer-sponsored retirement plan or an IRA (income limits apply).
True or False: At age 62, when you can start receiving Social Security benefits, you can start taking withdrawals from your IRA.
Explanation:
False: With few limitations, withdrawals from Traditional and Roth IRAs can be made as early as age 59.5.
True or False: If your 401(k) has been maxed out, you cannot contribute to an IRA.
Explanation:
False: The maximum contributions to an IRA and a 401(k) are entirely different.