Retirement Accounts
A 45-year-old takes a $30,000 distribution from her 401(k) to pay for her daughter's college tuition. What are the tax consequences?
The education expense exception to the 10% penalty applies only to IRAs, not employer plans like 401(k)s. The $30,000 is subject to ordinary income tax AND the 10% early withdrawal penalty ($3,000). If she had used IRA f
Complete Analysis & Legal Rationale
The education expense exception to the 10% penalty applies only to IRAs, not employer plans like 401(k)s. The $30,000 is subject to ordinary income tax AND the 10% early withdrawal penalty ($3,000). If she had used IRA funds, she could have avoided the penalty.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.