Roth IRA Quiz

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Enter Your Email Address to Compete for the prize!
example@example.com
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Where did the Roth IRA get its name?
It is an acronym for the Retirement Objective: Taxes Halted Act of 1998 (ROTH 1998) aimed at creating tax-efficient retirement plans as a safety net if the Social Security Trust Fund collapses in the future. The bill also introduced self-employed retirement plans and increased the limits of a regular IRA.
Is an anagram for “Thor,” the son of Odin and a Marvel character who is the god of thunder. Congress used the anagram to signify the strength of tax-free accumulation.
Named afterthe man known as “the taxpayer’s best friend,” Sen. William V. Roth.
Named after Sen. Roth Kemp, who authored the Roth IRA Bill and coined the phrase, “Capital gains got you down?”
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Which plan(s) also includes a Roth option
529 Plan
Solo 401(k) Plan
SEP and SIMPLE IRAs
HSAs (Health Savings Accounts)
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Regarding the Five Year Rule
Roth IRA RMDs distributed beginning at age 72
Contributions sent to a charity from a Roth IRA, which is limited to $100,000 a year and requires the Roth IRA custodian to send the donation directly to the charity
Distributions from a Roth IRA made when you are 59 ½ years of age or older and the Roth IRA account is at least five years old.
Any distribution from a qualified plan, including 401(K) and 403(B) plans, rolled over into a Roth IRA within 60 days of the date you receive the distribution.
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Roth IRA Qualified Distributions Are:
Applies for the first five years after your first-ever contribution to a Roth IRA.
Applies forfive years after any contribution to a Roth IRA until you are 59 1/2
Earnings on the Roth IRA are subject to the Five Year Rule.
Gains on the Roth IRA are subject to the Five Year Rule until you reach age 59 1/2.
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If you opened and funded your 2022 Roth IRA on April 18, 2023 (the final day in 2023 to file your 2022 tax return), the clock on the five-year rule expires on:
April 18, 2028
April 18, 2027
December 31, 2028
January 1, 2027
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IRS has income limitations for participation in Roth IRAs. However, in the past, you could engineer what is known as a "Back-Door" IRA, where you contributed to a regular IRA and later converted it to a Roth IRA. Which statement below is true?
Under the SECURE Act, back-door IRAs are no longer permitted as of January 1, 2023.
Back-door IRAs are permitted.
Back-door IRAs are permitted, but under the SECURE Act 2.0, back-door Roth IRAs will still be tax-free but will be subject to RMDs beginning at age 75.
Back-door Roth IRAs are permitted, however, SECURE Act 2.0 will remove income limitations on Roth IRAs beginning January 1, 2025.
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Mary opened her first Roth IRA seven years ago. Two years ago, she opened a different Roth IRA for $5,000. A month ago, Mary needed money and took it from the Roth IRA she opened two years ago. Mary took her $5,000 Roth contribution plus $872 of earnings. Which statement is true under the five-year rule:
Mary will be taxed on the $5,000 contribution and earnings since her new Roth IRA was less than five years old.
Mary will only be taxed on earnings since her new Roth IRA was less than five years old.
Mary will pay no tax on either the contribution or earnings
Mary can avoid the tax if she transfers the contributions and the earnings from her existing Roth IRA to her new Roth IRA within 60 days.
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Mary, who is over 60 years old, converted $50,000 of her regular IRA to a Roth IRA on December 4, 2015, another $50,000 on January 26, 2020, and another $50,000 on April 25, 2021. Under the Five-Year Rule, if Mary withdrew the entire $150,000 of converted Roth IRAs plus earnings:
Mary owes no income taxes since her original Roth IRA conversion was more than five years ago.
Mary owes income taxes only on her earnings for the January 26, 2020, and April 25, 2021,IRA Roth conversions.
Mary owes income taxes on her January 26, 2020, and April 25, 2021, converted amount and earnings.
Under IRS Ordering Rule, Mary owes taxes on the earnings of all the converted Roth IRAs, and Mary can withdraw the entire amount tax-free when she is 72 years old.
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Concerning a Roth IRA, IRS Ordering Rules specify:
In an audit, IRS can order all forms 5498 as evidence that the taxpayer has a Roth IRA instead of a regular IRA.
Since Roth IRAs are tax-free, Ordering Rules do not apply as they do for a regular IRA.
Ordering Rules only apply to Qualified Roth IRA distributions
The order your money comes from your Roth IRA when non-qualified distributions are involved.
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Your income pushes you over the level to qualify for a Roth IRA. You have a $54,000 traditional IRA, which was all deductible, meaning you have not paid taxes on any of it. You took this quiz, read about the back-door IRA, and decided to make a $6,000 back-door contribution to a Roth IRA. You placed a$6,000 non-deductible contribution in your regular IRA and then, relatively quickly, converted it to a Roth IRA with no gain on the $6,000 contribution. The amount subject to taxes on the back-door Roth IRA conversion is:
$0 - since there were no gains on the $6,000, and you already paid taxes on the $6,000 non-deductible Regular IRA contribution.
No tax is due, but a 10% penalty will apply on the $6,000 converted to a Roth IRA if you are under 59 ½ years old.
The pro-rata rule says that 10% of the back-door Roth conversion is taxable, resulting in $600 taxable income.
The pro-rata rule says 90% of your back door contribution is taxable, resulting in $5,400 in taxable income.
Should be Empty: