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Retirement Plan Borrowing and Repayment Quiz

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Retirement Plan Borrowing and Repayment Quiz

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Questions and Answers

What happens if someone does not take their first Required Minimum Distribution (RMD) for the year they turn 70½?

They must take two RMDs the following year.

They must take their first RMD by April 1 of the following year. (correct)

They are exempt from taking an RMD forever.

They lose all potential tax benefits from their retirement accounts.

What is the tax implication of repaying loans from a 401k?

Loans are repaid with after-tax dollars. (correct)

The loan amount is tax-exempt.

Loans are repaid with pre-tax dollars.

Loans are tax-deductible.

What happens if an employee does not repay a loan taken from their workplace retirement plan within 60 days of leaving their job?

The loan is forgiven.

The loan is automatically rolled over to an IRA.

The loan amount is returned to the retirement account.

The loan amount is considered a distribution. (correct)

How is a borrower in the 25% tax bracket affected when repaying a loan from a 401k?

$125 is needed to repay $100 of the loan. Signup and view all the answers

What is the consequence of not repaying a loan from a workplace retirement plan within 60 days of leaving employment?

The loan amount is subjected to income tax and potentially a 10% penalty. Signup and view all the answers

How many RMDs must be taken in the year following the year an individual turns 70½?

One Signup and view all the answers

What tax bracket example is given in the text to illustrate the impact of repaying a loan from a 401k?

$125 tax bracket Signup and view all the answers

If a borrower who took a loan from their workplace retirement plan is under 59 and a half years old and fails to repay it within the required timeframe, what penalty might they face?

$100 penalty Signup and view all the answers

What happens if a borrower leaves their job without repaying a loan taken from their workplace retirement plan?

'Income distribution' triggers. Signup and view all the answers

'Double taxation' in the context of repaying loans from 401ks refers to what process?

'Taxing twice' on the same money: once during repayment and later at withdrawal in retirement. Signup and view all the answers