Question
Which statements are true regarding a traditional individual retirement account? Choose three answers.
Employers create them and match employee contributions.
People can contribute to the account until retirement age.
People can withdraw money penalty-free at any time.
Contributions to the account are limited each year.
Contributions reduce taxable income.
Employers create them and match employee contributions.
People can contribute to the account until retirement age.
People can withdraw money penalty-free at any time.
Contributions to the account are limited each year.
Contributions reduce taxable income.
Answers
GPT-4o mini
The true statements regarding a traditional individual retirement account (IRA) are:
1. **Contributions are limited each year.** - There are annual contribution limits set by the IRS for traditional IRAs.
2. **Contributions reduce taxable income.** - Contributions to a traditional IRA may be tax-deductible, which can reduce your taxable income for the year in which the contribution is made, depending on your income and participation in an employer-sponsored retirement plan.
3. **People can contribute to the account until retirement age.** - Individuals can continue to contribute to a traditional IRA as long as they have earned income, up to the maximum age limit for contributions being lifted by the SECURE Act.
The other statements are not true for a traditional IRA:
- Employers do not create traditional IRAs and do not match contributions; those are features of employer-sponsored retirement plans like 401(k)s.
- People cannot withdraw money penalty-free at any time; withdrawals before age 59½ may incur a penalty and taxes.
1. **Contributions are limited each year.** - There are annual contribution limits set by the IRS for traditional IRAs.
2. **Contributions reduce taxable income.** - Contributions to a traditional IRA may be tax-deductible, which can reduce your taxable income for the year in which the contribution is made, depending on your income and participation in an employer-sponsored retirement plan.
3. **People can contribute to the account until retirement age.** - Individuals can continue to contribute to a traditional IRA as long as they have earned income, up to the maximum age limit for contributions being lifted by the SECURE Act.
The other statements are not true for a traditional IRA:
- Employers do not create traditional IRAs and do not match contributions; those are features of employer-sponsored retirement plans like 401(k)s.
- People cannot withdraw money penalty-free at any time; withdrawals before age 59½ may incur a penalty and taxes.