New Jersey Life Producer Practice Exam

When must owners of a Traditional IRA begin to take payments from their accounts?

1. At age 60

2. At age 59 1/2

3. At age 70 1/2

4. At age 65

The correct answer is: At age 70 1/2

The requirement for owners of a Traditional IRA to begin taking distributions is set at age 70½. This rule was established to ensure that individuals begin to withdraw their funds from the account and pay taxes on those distributions, as contributions to a Traditional IRA are typically made pre-tax. Starting these mandatory distributions helps to prevent individuals from indefinitely deferring taxable income. The threshold of 70½ is specifically mandated by the IRS for required minimum distributions (RMDs), ensuring that individuals begin to access their retirement savings to support their living expenses. Options related to other ages, such as 60, 59 ½, and 65, do not align with the federal regulations regarding RMDs. While individuals may choose to take withdrawals before 70½, they are not required to do so until they reach this age limit.