CH 18 - Individual Retirement Arrangements II

Question 1

What are the TWO types of IRA funding vehicles?

Answer 1

trust/custodial agreement

and

fixed annuity contract

Question 2

Name the TWO types of IRA prohibited investments.

Answer 2

life insurance

collectibles (except coins or precious metals)

Question 3

What are THREE prohibited transactions in an IRA?

Answer 3

• loans
• using plan assets
• selling property to IRA or IRA owner

Question 4

Considering following scenarios, choose the proper IRA given the following scenarios.

Roth or IRA?

A). Increasing tax rates…?

B). Decreasing tax rates…?

Answer 4

A). Roth is better (increasing)

B). IRA is better (decreasing)

Question 5

A Roth IRA is best for a participant who…? (3)

Answer 5

• will be in a higher tax bracket at retirement (tax diversification)
• wants flexibility in distributions (no minimum distribution rules)
• needs liquidation during retirement (estate planning)