IRA Basic Skills 3

Question 1

Which IRA type is specifically designed for self-employed individuals and small business owners?

Accepted Answer

SEP IRA

Answer

A SEP (Simplified Employee Pension) IRA allows self-employed individuals and small business owners to contribute up to 25% of compensation.

Question 2

What does it mean to 'roll over' an IRA?

Accepted Answer

Transfer funds from one retirement account to another

Answer

A rollover moves funds from one retirement account to another, typically without triggering taxes if done correctly within 60 days.

Question 3

How many IRA rollovers are you allowed to perform in a 12-month period?

Accepted Answer

One

Answer

The IRS limits taxpayers to one indirect (60-day) IRA rollover per 12-month period across all IRAs combined.

Question 4

What is an 'inherited IRA'?

Accepted Answer

An IRA received from a deceased person's estate

Answer

An inherited IRA is one that is passed to a beneficiary upon the death of the original IRA owner.

Question 5

Which of the following investments is generally NOT allowed inside an IRA?

Accepted Answer

Collectibles like coins and artwork

Answer

The IRS prohibits holding collectibles such as artwork, rugs, antiques, gems, stamps, and most coins inside an IRA.

IRA - Individual Retirement Account Practice Test