Series 65 – Uniform Investment Adviser Law Exam Retirement Plans and Taxation 1 — Questions and Answers
Question 1: What is the annual contribution limit for a Traditional IRA for an individual under age 50 in 2024?
- $6,000
- $7,000 (Correct answer)
- $6,500
- $8,000
Correct answer: $7,000
The 2024 IRA contribution limit is $7,000 for individuals under age 50, up from $6,500 in 2023.
Question 2: Which of the following best describes a Roth IRA's tax treatment?
- Contributions are tax-deductible; withdrawals are taxable
- Contributions are after-tax; qualified withdrawals are tax-free (Correct answer)
- Contributions and withdrawals are both tax-free
- Contributions are pre-tax; withdrawals are partially taxable
Correct answer: Contributions are after-tax; qualified withdrawals are tax-free
Roth IRA contributions are made with after-tax dollars, and qualified distributions in retirement are completely tax-free.
Question 3: An individual participates in a 401(k) plan and also wants to contribute to a Traditional IRA. Which factor determines whether the IRA contribution is tax-deductible?
- The employer's matching contribution rate
- The individual's modified adjusted gross income (MAGI) (Correct answer)
- The total years of service with the employer
- The type of investments held in the 401(k)
Correct answer: The individual's modified adjusted gross income (MAGI)
When an active participant in an employer plan contributes to a Traditional IRA, deductibility phases out based on the individual's MAGI.
Question 4: At what age must Required Minimum Distributions (RMDs) begin for most retirement accounts under current law (SECURE 2.0)?
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
Under SECURE 2.0 Act (effective 2023), the RMD starting age was raised to 73 for individuals born between 1951 and 1959.
Question 5: Which retirement plan type requires the employer to contribute a specific benefit amount to each eligible employee's account based on years of service and compensation?
- Defined contribution plan
- Defined benefit plan (Correct answer)
- SEP-IRA
- SIMPLE IRA
Correct answer: Defined benefit plan
A defined benefit plan promises a specified monthly benefit at retirement, typically based on salary history and years of service.
Question 6: What is the penalty for taking an early withdrawal from a Traditional IRA before age 59½, assuming no exception applies?
- 5% penalty plus ordinary income tax
- 10% penalty plus ordinary income tax (Correct answer)
- 15% penalty only
- 10% penalty only with no income tax
Correct answer: 10% penalty plus ordinary income tax
Early withdrawals from a Traditional IRA are subject to a 10% penalty plus ordinary income tax on the full amount withdrawn.
Question 7: Which of the following is NOT a qualifying exception to the 10% early withdrawal penalty from an IRA?
- Disability
- Higher education expenses
- First-time home purchase (up to $10,000)
- Purchasing a second vacation home (Correct answer)
Correct answer: Purchasing a second vacation home
Purchasing a second vacation home is not a recognized exception; only a first-time home purchase up to $10,000 qualifies.
Series 65 – Uniform Investment Adviser Law Exam Retirement Plans and Taxation 1
What is the annual contribution limit for a Traditional IRA for an individual under age 50 in 2024?