Retirement Accounts
A 62-year-old takes a distribution from their traditional IRA. How is this distribution taxed?
Traditional IRA after 59.5: ordinary income tax, NO penalty. Before 59.5: tax + 10% penalty.
Complete Analysis & Legal Rationale
Distributions from a traditional IRA after age 59 1/2 are taxed as ordinary income. There is no 10% early withdrawal penalty since the account holder is past the penalty age threshold. The distribution is not tax-free because contributions were made with pre-tax dollars.
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:
Traditional IRA distributions are taxable; Roth distributions may be tax-free.
Matches the verified teaching point in the explanation.
IRA distributions are always taxed as ordinary income, not capital gains.
The 10% penalty only applies to distributions before age 59 1/2.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.