IRA POP QUIZ
answers posted at the bottom
1) True or False? IRA commonly stands for Individual Retirement Account.
2) True or False? The minimum amount I need to open an IRA is $4,000.00.
3) True or False? Traditional IRA distributions are income tax-free if I use the money to purchase my first home.
4) True or False? Contributing to an IRA is the same as investing in the stock market.
5) True or False? Naming my partner as beneficiary on my IRA ensures that he/she will receive my IRA proceedes when I die.
6) True or False? If I have a 401(k) through my employer, I’m not allowed to also own an IRA.
7) True or False? Traditional IRA earnings grow income tax-deferred and Roth IRA earnings grow income tax-free.
Answers
1) True- IRA commonly stands for Individual Retirement Account. Remember, theres no such thing as a jointly owned IRA.
2) False Currently an IRA can be opened with as little as $50.00. Remember, $4,000.00 is the maximum contribution for tax year 2006. Not the minimum.
3) False – When you take a premature IRA distribution to purchase your first home the IRS waives the 10% early withdrawal penalty only (up to $10,000.00). Ordinary income tax is always due on a traditional IRA distribution…regardless of the reason you take it out.
4) False- Stocks and stock mutual funds are only one type of an investment that an IRA can hold. IRAs may also be invested in bonds, bond mutual funds, money market funds, fixed annuities, and CDs – just to name a few.
5) True – The beneficiary of record on file with the investment company sponsoring your IRA will be entitlghted to your IRA when you die.
6) False- Lots of people have both a 401(k) and an IRA. The issue is whether or not the contributions are deductible.
7) True- Traditional IRAs are taxed at your ordinary income tax rate when you withdraw the money. With a Roth IRA, however, the money can be distributed to you income tax-free after you reach age 591/2 (assuming the account is at least five years old).
Hope you did good!