Question

Which of the following is NOT true?

a.) Required minimum distributions (RMDs) must begin the year the participant turns age 70.
b.) Distributions from traditional IRAs are taxable as income.
c.) Excess contributions to a traditional IRA are subject to a 6% excise tax.
d.) Withdrawing from one's traditional IRA before age 59 ½ would be considered an early withdrawal.

Answer 1

The correct answer is d.) Withdrawing from one's traditional IRA before age 59 ½ would be considered an early withdrawal.

Step-by-step explanation:

The correct answer is d.) Withdrawing from one's traditional IRA before age 59 ½ would be considered an early withdrawal. Under current tax laws, individuals who withdraw funds from their traditional IRA before the age of 59 ½ are subject to an early withdrawal penalty of 10%. This penalty is in addition to the ordinary income tax that will be owed on the withdrawn amount. For example, if someone withdraws $10,000 from their traditional IRA at the age of 55, they would be subject to a $1,000 early withdrawal penalty, in addition to any income tax owed on the $10,000. This penalty is designed to discourage individuals from accessing their retirement savings before they reach their retirement age.