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

IRA withdrawals used to pay unreimbursed medical expenses that exceed 7.5% of AGI are exempt from the 10% early withdrawal penalty.

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

An IRA distribution can be rolled back into an IRA within 60 days to avoid taxation and penalties.

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

RMDs are calculated by dividing the prior year-end account balance by the life expectancy factor from the IRS Uniform Lifetime Table.

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

The 'Rule of 55' applies to qualified plans like 401(k)s, NOT to IRAs; the comparable IRA exception is substantially equal periodic payments (SEPP).

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

A SEPP plan (also known as 72(t) distributions) allows account holders to take penalty-free distributions before 59½ using one of three IRS-approved calculation methods.

IRA - Individual Retirement Account Practice Test

IRA - Individual Retirement Account Practice Test

IRA IRA Distribution and Withdrawals 2