IRA Roth IRA Strategies 1 — Questions and Answers
Question 1: What are the income limits for contributing directly to a Roth IRA for single filers in 2024?
- Phase-out begins at $130,000, ends at $145,000
- Phase-out begins at $146,000, ends at $161,000 (Correct answer)
- Phase-out begins at $138,000, ends at $153,000
- Phase-out begins at $153,000, ends at $168,000
Correct answer: Phase-out begins at $146,000, ends at $161,000
For 2024, single filers can fully contribute to a Roth IRA if MAGI is below $146,000, with phase-out ending at $161,000.
Question 2: What is the five-year rule for Roth IRA qualified distributions?
- Contributions must be held five years before withdrawal
- The Roth IRA must have been open for at least five tax years before distributions are qualified (Correct answer)
- Earnings can only be withdrawn after five years of employment
- Conversions must be held five years regardless of age
Correct answer: The Roth IRA must have been open for at least five tax years before distributions are qualified
For Roth IRA earnings to be distributed tax-free and penalty-free, the account must have been open for at least five tax years AND the account holder must be age 59½ or older.
Question 3: What is the order of distributions from a Roth IRA (ordering rules)?
- Earnings first, then conversions, then contributions
- Contributions first, then conversions, then earnings (Correct answer)
- All funds are distributed proportionally
- Oldest contributions first
Correct answer: Contributions first, then conversions, then earnings
Roth IRA ordering rules require that contributions are distributed first (always tax and penalty free), then conversions in order, then earnings last.
Question 4: Are Roth IRAs subject to required minimum distributions (RMDs) during the account owner's lifetime?
- Yes, starting at age 73
- Yes, starting at age 72
- No, Roth IRAs have no lifetime RMDs for the original owner (Correct answer)
- Only if the balance exceeds $1 million
Correct answer: No, Roth IRAs have no lifetime RMDs for the original owner
Roth IRAs are not subject to RMDs during the original owner's lifetime, making them ideal for tax-free growth and wealth transfer.
Question 5: What is the 'backdoor Roth IRA' strategy?
- Converting a 401(k) directly to a Roth IRA
- Making a non-deductible traditional IRA contribution and then immediately converting it to a Roth IRA (Correct answer)
- Contributing to a Roth IRA through an employer plan
- An illegal tax evasion scheme
Correct answer: Making a non-deductible traditional IRA contribution and then immediately converting it to a Roth IRA
The backdoor Roth involves making a non-deductible traditional IRA contribution and then converting it to a Roth IRA, allowing high earners to bypass Roth income limits.
Question 6: If a Roth IRA owner withdraws only contributions (not earnings) before age 59½, what is the tax treatment?
- 10% penalty applies plus ordinary income tax
- 20% withholding applies
- The withdrawal is tax-free and penalty-free (Correct answer)
- It is allowed only if used for a qualifying purpose
Correct answer: The withdrawal is tax-free and penalty-free
Roth IRA contributions can be withdrawn at any time, at any age, without taxes or penalties, because they were made with after-tax dollars.
IRA Roth IRA Strategies 1
What are the income limits for contributing directly to a Roth IRA for single filers in 2024?