Investment Tax-Advantaged Investing

Question 1

What is a Traditional IRA?

Accepted Answer

An investment account where contributions may be tax-deductible and growth is tax-deferred until withdrawal

Answer

A savings account insured by the FDIC with no annual limits

Answer

A government pension plan for federal employees

Answer

An investment account where all withdrawals are tax-free

Question 2

What makes a Roth IRA different from a Traditional IRA?

Accepted Answer

Roth IRA contributions are made with after-tax dollars, but qualified withdrawals are tax-free

Answer

Roth IRA contributions are tax-deductible; Traditional IRA withdrawals are tax-free

Answer

Roth IRAs have no contribution limits

Answer

Roth IRAs are only available to self-employed individuals

Question 3

What is the 2025 annual contribution limit for an individual IRA (Traditional or Roth) for those under age 50?

Accepted Answer

$7,000

Answer

$3,500

Answer

$5,500

Answer

$10,000

Question 4

What is a 401(k) plan?

Accepted Answer

An employer-sponsored retirement savings plan where contributions are made pre-tax and grow tax-deferred

Answer

A government healthcare savings account for retirees

Answer

A type of pension plan managed entirely by the government

Answer

A brokerage account with no annual contribution limits

Question 5

What is an employer match in a 401(k)?

Accepted Answer

An employer contribution to an employee's 401(k) based on the employee's own contributions

Answer

The fee an employer charges for administering the retirement plan

Answer

The maximum amount an employee can contribute annually

Answer

A penalty for withdrawing funds before retirement age

Question 6

What penalty typically applies to early withdrawals from a Traditional IRA before age 59½?

Accepted Answer

10% early withdrawal penalty plus ordinary income taxes on the amount withdrawn

Answer

5% penalty plus taxes

Answer

15% flat penalty with no additional taxes

Answer

20% penalty but no income tax