Retirement account types and the tax treatment of investment income and distributions tested on the Series 65 and 66 exams.
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- How is a Traditional IRA distribution taxed?
- As ordinary income in the year received
- Are Roth IRA contributions tax-deductible?
- No, they are made with after-tax dollars
- What makes a distribution from a Roth IRA qualified?
- The account has been held at least five tax years and the distribution is made after age 59.5, death, disability, or for a first-time home purchase
- What is the maximum employer contribution to a SEP-IRA?
- Up to 25 percent of self-employment income or the annual limit, whichever is less
- Can an employee make elective deferrals to a SEP-IRA?
- No, only the employer can make contributions
- What is required for an employer to sponsor a SIMPLE IRA?
- The employer must make either a matching contribution (up to 3 percent) or a 2 percent non-elective contribution
- What is the employee elective deferral limit for a SIMPLE IRA?
- 16,000 in 2024, plus a 3,500 catch-up contribution for employees age 50 and over
- In a Solo 401(k), can the self-employed owner contribute in both employee and employer capacities?
- Yes, contributing as both employee (elective deferral) and employer (profit-sharing contribution)
- What does a four-year cliff vesting schedule mean?
- An employee receives 0 percent of employer contributions until the end of year four, then vests 100 percent
- What is a hardship withdrawal from a 401(k)?
- An early distribution made to meet an immediate and heavy financial need, subject to income tax and potentially the 10 percent early withdrawal penalty
- Who sponsors a 403(b) plan?
- Schools, universities, hospitals, and certain non-profit organizations
- What type of organization sponsors a 457 plan?
- State and local governmental employers
- What is a qualified charitable distribution (QCD)?
- A direct transfer of up to 100,000 from an IRA to a qualified charity that counts toward RMDs and is not taxable
- What is the penalty for an IRA withdrawal before age 59.5?
- 10 percent of the amount withdrawn, plus ordinary income tax
- What is the Rule of 55 exception to early withdrawal penalties?
- An employee who separates from service at age 55 or later can withdraw from that employer plan penalty-free
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