Roth IRA Concepts

  1. Hugo Drax will turn 70 ½ during this year. If he takes an RMD of $8,000 from his Roth IRA, how much tax will he pay?
  1. Max Zorin is 75 and has never taken an RMD from his Roth IRA.
  2. If he takes an RMD of $8,000, how much tax will he pay?
  3. In what way is this an even bigger mistake than if he failed to take an RMD on a traditional IRA?
  1. General Koskov is 40. A few years ago, he contributed $80,000 to a Roth IRA. He decides to take an $80,000 distribution to start a business. He is in the 15% tax bracket. How much will he be taxed on this distribution?
  1. Auric Goldfiinger wants to hold ancient collectible non-US gold coins, mutual funds, real estate, and individually picked stocks in his Roth IR? Which of these investments are permitted? (See Investopedia tutorial, Contributions section, to find the answer.)
  1. Dr. No has a Roth IRA currently valued at $55,000. Upon his death, Rosa Klebb, age 60, inherits this Roth IRA. She wishes to close the account and take the entire balance as a distribution. Will she be taxed on this distribution?
  1. Franscisco Scaramango is 45 and wants to contribute as much as possible to his Roth IRA. What is his contribution limit for 2017?
  1. Renard decides to contribute $5,000 to his wife Elektra’s Roth IRA. What are some reasons he might want to do this?

Roth vs. Traditional IRAs

  1. Ernst Blofeld wants to save $5,000 for retirement. He is currently in the 28% tax bracket. He expects to be in the 15% tax bracket when he retires. He expects his account balance at retirement to be $6,500.
  2. If he contributes to a traditional IRA and leave the money in the account until he turns 60, how much total tax will he pay?
  3. If he contributes to a Roth IRA and leaves the money in the account until he turns 60, how much total tax will he pay?
  1. Mr. White wants to save $8,000 for retirement. He is currently in the 25% tax bracket. However, he expects a significant increase in his income in the future, putting him in the 35% tax bracket by the time he retires. He expects the retirement account to be worth $10,000 when he retires.
  2. If he contributes to a traditional IRA and leaves the money in the account until he turns 60, how much total tax will he pay?
  3. If he contributes to a Roth IRA and leaves the money in the account until he turns 60, how much total tax will he pay?
  1. Dominic Greene wants to save $7,000 for retirement. He is currently in the 25% tax bracket and expects to be in the 28% tax bracket when he retires. He expects the account to be worth $8,000 when he retires. Would you advise him to invest in a Roth IRA or a traditional IRA? Show your work to explain your recommendation.
  1. Raoul Silva is 39 and in the 28% tax bracket. A few years ago, he contributed $10,000 to a Roth IRA. The account is now worth $12,000. Raoul needs the money to pay off the computer equipment he put on his credit card, so he takes out the entire $12,000.
  2. Will Raoul be taxed and/or penalized on this Roth IRA distribution? If so, how much? Show your work.
  3. How much tax did Raoul originally pay on the $10,000 contribution?
  4. Suppose that Raoul had, instead, put the original $10,000 in a traditional IRA. What would be the total tax on the $12,000 distribution?