IRAs (Traditional, Roth, SEP) – Series 7 Exam

💼 IRAs (Traditional, Roth, SEP) – Series 7 Exam

What You Need to Know About Individual Retirement Accounts

The Series 7 exam tests your understanding of different types of Individual Retirement Accounts (IRAs)—how they function, how they’re taxed, and which investors benefit from each. Here’s a breakdown of Traditional, Roth, and SEP IRAs, tailored for Series 7 success.

🏦 1. Traditional IRA

🧾 Key Features:

• Tax-deferred growth
• Contributions may be tax-deductible (subject to income limits and participation in employer plans)
• Distributions taxed as ordinary income

📅 Contribution Limits (2025):

• $7,000 under age 50
• $8,000 age 50+ (includes $1,000 catch-up)

📤 Withdrawals:

• Penalty-free withdrawals after age 59½
• Required Minimum Distributions (RMDs) begin at age 73
• Early withdrawals (before 59½) incur a 10% penalty + taxes, with some exceptions

🌱 2. Roth IRA

🧾 Key Features:

• Contributions made with after-tax dollars
• Tax-free growth and tax-free qualified withdrawals
• No RMDs during the owner’s lifetime

📅 Contribution Limits (2025):

• Same as Traditional IRA: $7,000 / $8,000 with catch-up
• Income limits apply (eligibility phases out at higher incomes)

📤 Withdrawals:

• Contributions can be withdrawn anytime tax- and penalty-free
• Earnings can be withdrawn tax-free if the account is at least 5 years old and the owner is age 59½ or meets other qualified exceptions

👷 3. SEP IRA (Simplified Employee Pension)

🧾 Key Features:

• Designed for self-employed individuals or small businesses
• Only employers contribute, not employees
• Contributions are tax-deductible for the employer
• Contributions grow tax-deferred until withdrawal

📅 Contribution Limits (2025):

• Up to 25% of compensation or $69,000, whichever is less

📤 Withdrawals:

• Same rules as Traditional IRAs: taxed as ordinary income, 10% penalty before age 59½, RMDs required starting at age 73

🔍 Comparison Table

🧠 Key Exam Tips

• Know the differences in tax treatment between Traditional and Roth IRAs
• Understand eligibility and contribution limits
• Be able to recommend the appropriate IRA based on a client’s income, employment, and retirement goals
• SEP IRAs may appear in suitability scenarios for self-employed clients

🚀 Need More Retirement Account Prep?

Access full Series 7 lessons, comparison charts, and practice questions focused on retirement products, rollovers, and suitability analysis.

👉 https://finra-exam-mastery.com

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