IRA
What does IRA stand for?
Individual Retirement Account
Who offers a 401(k) plan?
Your employer
Who usually uses a SEP IRA?
Self-employed people or small business owners
Who is a SIMPLE IRA designed for?
Small businesses with 100 or fewer employees
What job did William Roth have and what did he help create?
A U.S. Senator who helped create the Roth IRA
What’s the main tax benefit of a Traditional IRA?
Contributions may be tax-deductible
What is a key benefit of contributing to a Traditional 401(k)?
It lowers your taxable income now
Can employees put their own money into a SEP IRA?
No, only employers contribute
What is a common contribution method for employers in a SIMPLE IRA?
Matching employee contributions up to 3% of pay
Which type of retirement account allows self-employed people to create both employee and employer contributions for themselves?
Solo 401(k) (also known as an Individual 401(k))
What happens if you withdraw from a Traditional IRA before age 59½?
You’ll owe taxes plus a 10% early withdrawal penalty
What does it mean if your 401(k) has a “match”?
Your employer adds money to your account based on your contributions
If an employer contributes 10% to their own SEP IRA, what must they contribute for eligible employees?
10% of each eligible employee’s compensation
What’s the penalty for withdrawing from a SIMPLE IRA in the first 2 years?
25%
What was the main purpose behind the creation of the Roth IRA?
To allow Americans to save for retirement with tax-free withdrawals
How does the IRS treat Traditional IRA contributions if you’re covered by a workplace plan and exceed the income limits?
They become non-deductible, but you can still contribute
What happens to your 401(k) if you leave your job?
three things
You can leave it, roll it into an IRA, or move it to a new plan
Can you contribute to both a SEP IRA and a Traditional or Roth IRA in the same year?
Yes, as long as you stay within each plan’s limits
Can employees contribute to their own SIMPLE IRA?
Yes
What strategy lets high earners bypass Roth IRA income limits?
Backdoor Roth IRA
Can you contribute to both a Traditional and Roth IRA in the same year, and what is the combined limit for 2025?
Yes, you can contribute to both, but the combined total can’t exceed $7,000 (or $8,000 if age 50+).
What IRS rule allows penalty-free withdrawals from a 401(k) after separating from a job at age 55 or older?
The Rule of 55
What is the IRS rule that limits total annual contributions when someone participates in both a SEP IRA and another retirement plan like a 401(k)?
The total combined contributions can’t exceed $69,000 or 100% of income in 2025.
What’s the contribution limit for a SIMPLE IRA in 2025? Also, what age is the catch up contribution and how much is it.
$16,000 (or $19,500 if age 50+)
What rule limits contributions to a Roth IRA for people with existing traditional IRAs during a backdoor Roth conversion?
Pro-rata rule