Practice Quiz

FINRA Series 6

Category - Series 6

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Ms. Pye has quit her job to become a full-time mother and wants to roll over the funds from her 401(k) plan into an IRA. As her financial adviser, you should tell her that:
  1. this is unwise since she will have to pay both taxes and a penalty on the funds that are rolled over.
  2. if she has the funds transferred directly from her 401(k) plan to the IRA, she will avoid having 20% withheld.
  3. if she opts to take possession of the funds herself prior to depositing them in the IRA account, she must make the deposit within 30 days to avoid a 10% penalty.
  4. both B and C.
Explanation
Answer: B - If Ms. Pye wants to rollover the funds from her 401(k) plan into an IRA, you should tell her that if she has the funds transferred directly from her 401(k) plan to the IRA, she will avoid having 20% withheld. She will not have to pay either taxes or a penalty on the funds that are rolled over if she follows specified guidelines, and if she opts to take possession of the funds herself prior to depositing them in the IRA account, she has 60 days in which to do so before a 10% penalty is assessed.
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