Traditional vs. Roth IRAs

What does IRA stands for?

(a)  

What is the primary tax benefit of an IRA?

• • No taxes on any income

• • No taxes on contributions

• • Investment income and gains aren’t taxed while in the account

• • Immediate cash rebates

When do you get a tax break with a traditional IRA?

• • When making contributions

• • When withdrawing money

• • Only after retirement

• • After five years

With a traditional IRA, you pay taxes on money you withdraw.

• True

• False

With a Roth IRA, when do you get a tax break?

• • When contributing to it

• • During withdrawals in retirement

• • Each year

• • When you turn 70 years old

Which factor is most important when deciding between a traditional and Roth IRA?

• • Your retirement age

• • Future investment returns

• • Your expected tax rate during retirement

• • The number of children you have

Who might benefit more from a Roth IRA?

• • Someone with a high current tax rate

• • Someone expecting a higher tax rate in retirement

• • A retiree with a pension

• • A person looking for immediate tax deductions

What is one reason why contributing to both a traditional and Roth IRA is recommended by experts?

• • To increase income

• • To spread out tax savings

• • To reduce retirement age

• • To avoid tax penalties

What happens if you withdraw "earnings" from a Roth IRA before retirement?

• • They are always tax-free

• • They are subject to income tax and penalties

• • They must be reinvested

• • They are subject to capital gains tax

At what age can you withdraw from a traditional IRA without penalties?

• • 50 years old

• • 59½ years old

• • 65 years old

• • 70 years old