Retirement Accounts
A 45-year-old investor takes a $20,000 distribution from their Traditional IRA to pay off credit card debt. What are the tax consequences?
Traditional IRA distributions before age 59 1/2 are subject to ordinary income tax plus a 10% early withdrawal penalty. Paying off credit card debt does not qualify for any penalty exception. The investor owes tax on $20
Complete Analysis & Legal Rationale
Traditional IRA distributions before age 59 1/2 are subject to ordinary income tax plus a 10% early withdrawal penalty. Paying off credit card debt does not qualify for any penalty exception. The investor owes tax on $20,000 plus a $2,000 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 concept in the explanation.
Does not match the governing concept in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.