Question of the Week

Donald has been putting aside money for his retirement into a Roth IRA for six years.  Although he recently celebrated his 71st birthday, Donald has no intention of retiring for several years.  If he has not begun to withdraw funds from the IRA, what are the tax and penalty implications?
   
A) There are no tax or penalty implications.
B) The amount of funds above his cost basis in the fund will be taxed at the ordinary rate and penalized at the 50% rate.
C) Failure to begin withdrawals from this type of account, by age 70½ will be subjected to a penalty of 50% of the amount that represents insufficient withdrawals.
D) Since he began no withdrawals at age 59½, he will have to begin paying ordinary income tax plus a 10% penalty on the full amount deducted.

Answer:

The correct answer is A)

In a Roth IRA, there is no required distribution date as there is in a traditional IRA.


Professionals FAQs
  1. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
  2. If I am looking to get an Investment Banking job. What education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The caveat here is that the MBA would most probably need to be from a Top-20 B-School.The Chartered Financial Analyst (CFA) is well worth considering if you (a) are aiming for an entry-level position in investment banking, and/or (b) cannot afford to shell out six figures for an MBA or have to settle for a lesser-known B-school.That's because in the investment banking field, most entry-level positions are at the analyst level.
  3. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it. The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam.
  4. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification examC. Filing a consent to service of processD. Posting a surety bond The correct answer is "A", since only an IA would need to prove minimum net capital requirements.