IRA Knowledge 4

Question 1

What is the income phase-out range for Roth IRA contributions for a single filer in 2024?

Accepted Answer

$146,000–$161,000

Answer

For 2024, single filers can contribute to a Roth IRA with a modified AGI up to $146,000, with a phase-out up to $161,000.

Question 2

Which of the following investments is generally PROHIBITED inside an IRA?

Accepted Answer

Life insurance contracts

Answer

The IRS prohibits holding life insurance contracts inside an IRA; other investments like stocks, bonds, and REITs are generally permitted.

Question 3

What is 'earned income' for IRA contribution purposes?

Accepted Answer

Wages, salaries, tips, self-employment income, and alimony received

Answer

Earned income for IRA purposes includes wages, salaries, tips, self-employment income, and taxable alimony — not passive investment income.

Question 4

What is the penalty for over-contributing to an IRA?

Accepted Answer

6% excise tax per year the excess remains

Answer

The IRS charges a 6% excise tax each year on excess IRA contributions that are not corrected before the tax deadline.

Question 5

Which of the following correctly describes a 'self-directed IRA'?

Accepted Answer

An IRA that allows investment in alternative assets like real estate, private equity, and precious metals

Answer

A self-directed IRA allows account holders to invest in a broader range of alternative assets beyond typical stocks and mutual funds.

IRA - Individual Retirement Account Practice Test