Investment Advisor Retirement Planning and Tax Strategies 1 — Questions and Answers
Question 1: What is the annual contribution limit for a Traditional IRA for individuals under age 50 in 2024?
- $3,500
- $6,500
- $7,000 (Correct answer)
- $23,000
Correct answer: $7,000
In 2024, the IRA contribution limit for individuals under age 50 is $7,000, while those 50 and older can contribute $8,000 with the catch-up provision.
Question 2: At what age must holders of Traditional IRAs begin taking Required Minimum Distributions (RMDs)?
- 59½
- 65
- 72
- 73 (Correct answer)
Correct answer: 73
The SECURE 2.0 Act changed the RMD starting age to 73 for individuals who reach age 72 after December 31, 2022.
Question 3: A Roth IRA differs from a Traditional IRA primarily in that:
- Roth contributions are tax-deductible but withdrawals are taxable
- Roth contributions are after-tax but qualified withdrawals are tax-free (Correct answer)
- Roth IRAs have no contribution limits
- Roth IRAs require RMDs starting at age 73
Correct answer: Roth contributions are after-tax but qualified withdrawals are tax-free
Roth IRA contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free, including earnings.
Question 4: Which retirement plan type allows self-employed individuals the highest contribution limits?
- Traditional IRA
- Roth IRA
- Solo 401(k) (Correct answer)
- SIMPLE IRA
Correct answer: Solo 401(k)
A Solo 401(k) allows self-employed individuals to contribute as both employee and employer, with combined 2024 limits of up to $69,000 ($76,500 with catch-up).
Question 5: What is the penalty for taking an early withdrawal from a Traditional IRA before age 59½?
- 5% early withdrawal penalty plus income taxes
- 10% early withdrawal penalty plus income taxes (Correct answer)
- 15% flat penalty with no taxes
- No penalty if reinvested within 60 days
Correct answer: 10% early withdrawal penalty plus income taxes
Early IRA withdrawals before age 59½ are subject to a 10% penalty tax plus ordinary income taxes on the withdrawn amount, with certain exceptions.
Question 6: A 401(k) plan's annual employee contribution limit for 2024 is:
- $7,000
- $16,000
- $23,000 (Correct answer)
- $46,000
Correct answer: $23,000
The 2024 employee contribution limit for 401(k) plans is $23,000, with an additional $7,500 catch-up contribution allowed for those age 50 and older.
Investment Advisor Retirement Planning and Tax Strategies 1
What is the annual contribution limit for a Traditional IRA for individuals under age 50 in 2024?