IRA IRA Distribution and Withdrawals 2

Question 1

Which of the following medical expenses qualifies for the early IRA withdrawal penalty exception?

Accepted Answer

Medical expenses exceeding 7.5% of AGI

Answer

Any medical expense

Answer

Only hospital expenses

Answer

Only prescription drug costs

Question 2

Can IRA distributions be rolled over back into an IRA if the account holder changes their mind?

Accepted Answer

Yes, within 60 days

Answer

No, once withdrawn it cannot be returned

Answer

Yes, within 30 days

Answer

Yes, but only once every 5 years

Question 3

How is the RMD amount calculated for a traditional IRA?

Accepted Answer

Account balance divided by life expectancy factor from IRS tables

Answer

Fixed 4% of account balance

Answer

Account balance multiplied by your tax rate

Answer

Same fixed dollar amount each year

Question 4

Which exception to the early withdrawal penalty applies to individuals who have separated from service and are at least age 55?

Accepted Answer

The rule of 55 (applies to 401(k) plans, NOT IRAs)

Answer

IRA exception for medical expenses

Answer

Substantially equal periodic payments

Answer

First-time homebuyer exception

Question 5

What is a Substantially Equal Periodic Payment (SEPP) plan used for?

Accepted Answer

Taking penalty-free distributions before age 59½ using IRS-approved methods

Answer

Increasing IRA contributions gradually over time

Answer

Splitting an IRA between multiple beneficiaries

Answer

Converting a traditional IRA to Roth in equal installments

Question 6

In which situation can an IRA owner withdraw funds penalty-free for health insurance premiums?

Accepted Answer

While unemployed and receiving unemployment compensation for at least 12 weeks

Answer

Any time they pay a health insurance premium

Answer

Only if they are self-employed

Answer

Only after age 55