Question

In order to avoid paying a penalty on the conversion of a traditional IRA to a Roth IRA, the rollover must be completed within (1) days.

a) 30
b) 60
c) 90
d) 120

Answer 1

To avoid penalties, the conversion of a traditional IRA to a Roth IRA must be done within 60 days. This is known as the 60-day rollover rule, which allows for a tax-free transfer of funds if completed within the specified time limit.

Step-by-step explanation:

In order to avoid paying a penalty on the conversion of a traditional IRA to a Roth IRA, the rollover must be completed within 60 days. The correct answer to the question is option b) 60. This 60-day rule allows for the tax-free rollover of funds from one retirement account to another, as long as it is completed in this timeframe. Failing to adhere to this rule can lead to taxes and penalties, as the amount that wasn't rolled over could be considered a distribution and thus be subject to taxation along with an early distribution penalty if applicable.