SIE Exam Question 654: Answer and Explanation

Question: 654

Alex, age 70, has contributed $20,000 to a Roth IRA throughout his career. The account value is now $30,000. If Alex withdraws the entire amount, how much tax will he owe if he's in the 28% tax bracket?

• A. $0
• B. $1,500
• C. $4,500
• D. $8,400

Correct Answer: A

Explanation:

Roth IRA contributions are made with after-tax dollars and grow tax-free. Alex will not owe taxes when he takes the distribution.