IRA Knowledge 2

Question 1

What is the penalty for withdrawing from a traditional IRA before age 59½?

Accepted Answer

10% early withdrawal penalty

Answer

The IRS imposes a 10% early withdrawal penalty on distributions taken before age 59½, in addition to ordinary income tax.

Question 2

Which of the following is a qualified exception to the 10% early withdrawal penalty for IRAs?

Accepted Answer

Permanent disability

Answer

Permanent disability is one of the IRS-recognized exceptions that waives the 10% early withdrawal penalty.

Question 3

What is the maximum annual contribution to a Roth IRA for someone under age 50 in 2024?

Accepted Answer

$7,000

Answer

For 2024, the IRA contribution limit for individuals under 50 is $7,000 per year.

Question 4

How does a SEP-IRA differ from a traditional IRA in terms of contribution limits?

Accepted Answer

SEP-IRA allows contributions up to 25% of compensation or $69,000 (2024)

Answer

A SEP-IRA allows employers to contribute up to 25% of an employee's compensation or $69,000 for 2024, far exceeding traditional IRA limits.

Question 5

At what age must traditional IRA holders begin taking Required Minimum Distributions (RMDs)?

Accepted Answer

Age 73

Answer

Following the SECURE 2.0 Act, the RMD starting age for traditional IRAs is 73 for individuals born between 1951 and 1959.

IRA - Individual Retirement Account Practice Test