So, did you take our Roth IRA quiz? Here are the answers – there are 14 points in all because the last questions counts 2.
Answers to Roth IRA quiz:
- TRUE If you close all of your Roth IRA accounts, you can deduct the difference between your “basis” (what you put in) and what you got out. The difference is a miscellaneous itemized deduction on Schedule A.
- FALSE You can contribute another $18,000 ($24,000 if age 50+) to a Roth 401k if offered by your employer.
- TRUE You can always take out your original Roth contributions, tax- and penalty-free. The rules get more complicated when you have rolled or converted money to a Roth or are taking a distribution from your designated Roth IRA at your place of employment.
- TRUE As soon as your kids can make money on their own or working for you they can contribute to a Roth.
- FALSE You can divide up to $5,500 ($6,500 if age 50+) between a Roth and a TIRA any way you want.
- TRUE Each spouse can contribute up to the annual limit to individual Roth IRAs as long as the working spouse earns the sum of both contributions.
- TRUE Low income taxpayers who are not dependents on another person’s return may get a Retirement Savings Credit of up to $2,000 per person.
- FALSE There are no distribution requirements for Roth IRAs.
- FALSE Beneficiaries will pay no tax on inherited Roth IRAs, but they are required to begin taking distributions.
- TRUE In the past, you had to first roll your 401k into an IRA before converting into a Roth, but, as long as your plan allows, you can convert directly into a Roth IRA.
- TRUE You have until October 15 of the year following a conversion to change your mind and “undo” it.
- FALSE Roth IRAs are great for Boomers and Seniors in certain situations.
- TRUE and FALSE Yes, you can superfund a Roth IRA (IRS Notice 2014-54) with the after-tax contributions in your retirement account. No, you cannot superfund tax-free if you have any growth in the account. You will owe no tax on your original contributions but you will tax on any growth at your marginal tax bracket. (2 points)
So, how did you do? If you scored 12 or higher, you are probably the go-to financial guru at work. A score of 8 – 11 tells me you know more than the average investor. If you got half or fewer correct, you may need a second opinion on your retirement strategy! As I alluded to in Question 12, Roth IRAs can be very useful for Seasoned Citizens. Watch my (painfully slow) video for four ways to benefit from adding to a later-life Roth.
You can learn more Roth IRA strategies in our Doctor Dilemmas and Fiscal Fitness blogs. And if you want to find out more about how Roth IRAs can fit into your retirement strategy, schedule a no-obligation free initial consultation.