ECONOMICS
SAVING AND INVESTING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Traditional IRA
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Municipal Bond
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403(b)
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Roth IRA
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Detailed explanation-1: -In order to guarantee that the benefits of IRAs are used solely for retirement, the IRS imposes age limits on these accounts. Unless users are willing to incur a 10% penalty, IRA assets are not accessible until age 59 and a half.
Detailed explanation-2: -Once you reach age 59.5, you may withdraw money from your 401(k) penalty-free. If you tap into it beforehand, you may face a 10% penalty tax on the withdrawal in addition to income tax that you’d owe on any type of withdrawal from a traditional 401(k).
Detailed explanation-3: -Age 59½ and over: No withdrawal restrictions Once you reach age 59½, you can withdraw funds from your Traditional IRA without restrictions or penalties.
Detailed explanation-4: -Recall that withdrawals from tax-deferred accounts are subject to ordinary income taxes, which can be taxed at federal rates of up to 37%. And if you tap these accounts prior to age 59½, the withdrawal may be subject to a 10% federal tax penalty (barring certain exceptions).