SIE practice questionmediumRoth IRA
Which of the following is a key difference between a traditional IRA and a Roth IRA?
- ABoth types have required minimum distributions starting at age 73
- BTraditional IRA contributions may be tax-deductible; qualified Roth IRA withdrawals are tax-free✓ Correct answer
- CRoth IRA contributions are tax-deductible; traditional IRA contributions are not
- DRoth IRAs have no income limits for eligibility
Explanation
Why B — Traditional IRA contributions may be tax-deductible; qualified Roth IRA withdrawals are tax-free
The key difference is the timing of the tax benefit: traditional IRA contributions may be tax-deductible (reducing current-year taxes), but withdrawals in retirement are taxed as ordinary income. Roth IRA contributions are made with after-tax dollars (no deduction), but qualified withdrawals in retirement are completely tax-free. Roth IRAs do not have required minimum distributions (RMDs) during the owner's lifetime, while traditional IRAs require RMDs starting at age 73.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Account Types questions
- Under FINRA rules, when a customer requests a transfer of their brokerage account via ACATS, the delivering firm must…
- What is the maximum annual contribution to a traditional IRA for an individual under age 50 (2024)?
- Before opening a margin account, a broker-dealer must provide the customer with:
- A Transfer on Death (TOD) designation on a brokerage account allows: