15
QuizMultiple Choice

Retirement — Test

Question 15 • Financial Math

A 35 -year-old freelance worker contributes $⁢4,000 annually to a Roth IRA. They decide to withdraw $⁢3,000 for a vacation. What are the taxes and penalties on this withdrawal?

Answer
A
300 dollars penalty and no taxes
B
no penalty and taxed as ordinary income
C
400 dollars penalty and taxed as ordinary income
D
no penalties or taxes

Explanation

Roth IRA withdrawals are generally taken from contributions before investment earnings. Since the worker has contributed $4,000 and withdraws only $3,000, the withdrawal comes from contributions and is tax-free and penalty-free. The correct choice is “no penalties or taxes.”

AI-written and checked against the verified answer.

Previous
Next