Quiz: All About IRA Cashouts
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All About IRA Cashouts
By: Staff
Image: refer to hsw

About This Quiz

It can take years, and often decades, to build up funds in an Individual Retirement Account (IRA). However, it can take just moments to cash it out. Do you know the ins and outs of IRA cashouts? Take our quiz to test your knowledge!

1.0 of 10
At what age can you draw on your IRA without incurring penalties?

At age 59 1/2, your IRA funds become available to you without an early withdrawal penalty.

2.0 of 10
Of all the people who leave their jobs, how many cash out their IRAs?

Unless they can qualify for exceptions, this 46 percent pays the added income tax and penalty that go along with early withdrawal.

3.0 of 10
How much is the early withdrawal penalty?

Between taxes and interest, people who withdraw their IRAs before age 59 1/2 may lose up to 38 percent of their funds to taxes and the 10 percent withdrawal penalty.

4.0 of 10
When can you avoid penalties if you want to withdraw funds early?

Hardship exceptions can help offset unforeseen expenses, including both funeral costs and medical bills.

5.0 of 10
Which of these situations allows you to withdraw money penalty-free from your IRA before age 59 1/2?

If you want to retire early, a 72(t) Early IRA Distribution allows you to withdraw equal amounts from your IRA, once a year, for at least five years.

6.0 of 10
Hardship exceptions that allow penalty-free withdrawals include which of these?

If you haven't owned a home for at least two years, or if you or your loved ones are going to college, you can qualify for penalty-free IRA withdrawal.

You shouldn't withdraw funds in either of these circumstances. Most accountants wouldn't advise you to remove IRA funds when the investment is doing poorly, and if you need some quick cash, they would suggest finding another source.

8.0 of 10
Withdrawing from an IRA to pay off credit cards is:

Do the math: The goal is to increase your worth and lower your debt, so if you can come out ahead by cashing out an IRA to pay off credit cards, sometimes it's a good idea. However, you might want to talk to an accountant before cashing out.

9.0 of 10
If you're at risk of foreclosure or eviction, your IRA funds can be considered:

Risk of foreclosure or eviction is considered a hardship, and you may be able to withdraw from an IRA penalty-free to help you save your home.

10.0 of 10
You can qualify for penalty-free withdrawals with:

Not all employers or funds allow every category of early, tax-free withdrawal. Check with your human resources manager to find out what your company allows.

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