What is a Traditional IRA?
Retirement Accounts

Flashcard
•
Mathematics
•
12th Grade
•
Hard
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1.
FLASHCARD QUESTION
Front
Back
A Traditional IRA (Individual Retirement Account) is a retirement savings account that allows individuals to contribute pre-tax income, which can grow tax-deferred until withdrawal during retirement.
2.
FLASHCARD QUESTION
Front
What is a Roth IRA?
Back
A Roth IRA is a retirement savings account that allows individuals to contribute after-tax income, meaning contributions are taxed upfront, but withdrawals during retirement are tax-free.
3.
FLASHCARD QUESTION
Front
What is the tax implication of withdrawing from a Traditional IRA before retirement?
Back
Withdrawals from a Traditional IRA before age 59½ may incur a 10% early withdrawal penalty, in addition to regular income tax on the amount withdrawn.
4.
FLASHCARD QUESTION
Front
What is the contribution limit for IRAs in 2023?
Back
The contribution limit for IRAs in 2023 is $6,500, or $7,500 if you are age 50 or older.
5.
FLASHCARD QUESTION
Front
What is a 401(k) plan?
Back
A 401(k) plan is a tax-advantaged retirement savings plan offered by employers that allows employees to save a portion of their paycheck before taxes are taken out.
6.
FLASHCARD QUESTION
Front
What does it mean for an employer to 'match' contributions in a 401(k)?
Back
Employer matching means that an employer contributes additional funds to an employee's 401(k) account, typically matching a percentage of the employee's contributions up to a certain limit.
7.
FLASHCARD QUESTION
Front
What is the difference between pre-tax and post-tax contributions?
Back
Pre-tax contributions are made before income tax is deducted, reducing taxable income in the year of contribution. Post-tax contributions are made after income tax is deducted, allowing for tax-free withdrawals in retirement.
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