Series 7 practice questionmediumRetirement Plans 380
Taking a distribution from a retirement account before age 59½ usually results in:
- Acapital gains treatment only
- Bordinary income tax and potentially a 10% penalty unless an exception applies✓ Correct answer
- Cno tax if reinvested in common stock
- Dautomatic AMT exemption
Explanation
Why B — ordinary income tax and potentially a 10% penalty unless an exception applies
Early retirement distributions are generally taxable as ordinary income and may be subject to a 10% additional tax. Various exceptions exist, but the default rule is tax plus penalty.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 755+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Information & Recommendations questions
- A 40-year-old customer contributes to a traditional IRA and meets the eligibility rules. The primary tax feature is…
- Which retirement plan is designed primarily for self-employed individuals and small business owners?
- A 41-year-old investor wants tax-free qualified withdrawals in retirement. Which plan best fits?
- A 401(k) plan is best described as: