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If you're one of the people (like me) who enjoy taking quizzes, please read on. The answers are at the end of the article, so don’t peek.
How well do you know Individual Retirement Accounts (IRA)? Check your knowledge by answering these 18 basic true/false questions. If you miss more than 3 or 4, we hope you are not making IRA decisions by yourself (we’re here to help!).
1. If you have a 401(k) plan at work, you can still have an IRA.
True or False
2. You can have as many IRAs as you like.
True or False
3. Traditional deductible IRAs are generally better than Roth IRAs for people who expect to be in a lower tax bracket during retirement than they are now.
True or False
4. All IRAs compound their earnings without being subject to current taxation.
True or False
5. You can withdraw money from a traditional IRA before age 59 ½ for any reason and incur no penalty if you use the so-called“annuity exception”.
True or False
6. There is no minimum age restriction on traditional and Roth IRAs so long as you have earned income.
True or False
7. A nonworking individual can make a $6,000 annual IRA contribution but the amount is limited by the amount of income earned.
True or False
8. It is generally unwise to put tax free investments in an IRA.
True or False
9. An IRA is a particularly good vehicle for investment that derive most of their return from short-term capital gains or interest income.
True or False
10. You can revers a rollover from a traditional IRA to a Roth IRA.
True or False
11. An IRA is more flexible than a 401(k) plan because you can invest your money almost anywhere.
True or False
12. Thanks to the power of compounding, the earlier you start contributing to an IRA the better.
True or False
13. A traditional IRA generally requires you to start withdrawing money no later than April 1 of the year following the year you turn age 72, but there is no such restriction in a Roth IRA.
True or False
14. You can change the beneficiaries you designate on an IRA as frequently as you want.
True or False
15. You can contribute to an IRA for a given year as late as the due date of that year’s tax return, not including extensions.
True or False
16. Withdrawals from traditional and Roth IRAs before age 59 ½ can be used to pay for some medical, educational and home-purchase costs without paying early withdrawal premiums.
True or False
17. Most mutual fund families reduce their minimum initial investments for IRAs.
True or False
18. Many IRA custodians will open an IRA for a child/minor with earned income.
True or False
Surprise, all the answers are true!
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