Tag: IRA

Study Question of the Week: August 6, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, and Series 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, and Series 99): 

A client wants to open a custodial IRA account for his minor daughter who has earned a couple thousand dollars babysitting. Which of the following would be the best choice?

Answers:

A. Traditional IRA

B. Roth IRA

C. SIMPLE IRA

D. SEP IRA

Correct Answer: B. Roth IRA

Rationale: SEP and Simple IRAs are for small businesses. A traditional IRA would work but since the client’s daughter doesn’t have enough income to take advantage of the tax deduction benefit from a traditional IRA, the Roth IRA is the best choice since it will permit her to eventually withdraw tax-free.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: February 12, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 65, and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 65, and Series 66): 

Carlos, age 58, is in the 25 percent marginal income tax bracket. If he takes a $10,000 distribution from his IRA to pay off credit card debt, Carlos will be subject to a total payment of:

Answers:

A. $0

B. $3,250

C. $2,500

D. $3,500

Correct Answer: D. $3,500

Rationale: Carlos will have to pay ordinary income tax of 25% on his distribution, plus a 10% penalty for early withdrawal because he is under age 59 1/2. $10,000 (distribution amount) x 35% (tax + penalty) = $3,500 total payment for both tax-and-penalty. Perhaps Carlos should look at the $1,000 he will be paying in penalty and compare that to the total anticipated interest payments he will be making on his credit card over the next year and a half.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: July 23, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, and Series 66): 

Roth IRAs are more liquid than traditional IRAs in what way?

Answers:

A. they offer tax-free distribution

B. they allow for the withdrawal of all principal contributions at any time without tax or penalty

C. there are a larger number of exceptions available to the early withdrawal penalty

D. there are no mandatory minimum distributions required

Correct Answer: B. they allow for the withdrawal of all principal contributions at any time without tax or penalty

Rationale: Although Roth IRAs do offer tax-free distributions and have no mandatory minimum distributions, their advantage in liquidity lies in the ability of the account owner to withdraw all principal contributions at any time, including before age 59 1/2.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.