Understanding IRAs

What is the maximum annual contribution limit for a traditional IRA?

• $8,000

• $7,500

• $6,500

• $5,000

What is a key tax benefit of a traditional IRA?

• Tax-free growth

• Tax-deductible contributions

• Tax-free withdrawals

• No contribution limit

When do you have to pay taxes on the money withdrawn from a traditional IRA?

• When you contribute

• When the account grows

• When you withdraw during retirement

• Never

What is a key tax benefit of a Roth IRA?

• Tax-deductible contributions

• Tax-free growth and withdrawals

• No contribution limit

• Tax-free contributions

At what age does the example suggest starting to max out contributions to a Roth IRA?

• 20

• 25

• 30

• 35

How much would you have by age 65 if you max out your Roth IRA contributions starting at age 25?

• $1.5 million

• $1.6 million

• $1.7 million

• $1.8 million

Which type of IRA allows tax-free withdrawals during retirement?

• Neither

• Both Traditional and Roth IRA

• Roth IRA

• Traditional IRA

What happens to the growth in a traditional IRA over the years?

• It is taxed at a lower rate

• It is not reported on taxes until withdrawal

• It is tax-free

• It is taxed annually

What is the tax treatment of contributions to a Roth IRA?

• Tax-deductible

• Tax-free

• Taxed as ordinary income

• Not tax-deductible

A person can set up an Individual Retirement Account (IRA) at a

• bank

• social security office

• small loan company

• real estate agency

Answer explanation

An Individual retirement Account (IRA) can be set up by a person at a bank, credit union, or investment firm