Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What is the maximum contribution to an IRA for an individual under 50 years old?

$4,000
$5,000
$6,000
$7,000

The correct answer is: $5,000

The maximum contribution to an Individual Retirement Account (IRA) for an individual under 50 years old is $6,000. This limit is set by the IRS and can be adjusted for inflation in future years, but for tax year 2023, $6,000 is the correct amount. Contributions to an IRA are designed to incentivize individuals to save for retirement, and the limit of $6,000 reflects the government's efforts to encourage longer-term saving for those not yet retirement age. Individuals aged 50 and older can make additional "catch-up" contributions, allowing them to save more as they approach retirement, which is why the maximum contribution for those individuals is higher at $7,000. The amount of $5,000 also does not reflect the current limit and might have been a previous limit, but it is outdated. This knowledge is crucial for accurate financial planning and ensuring individuals can take full advantage of their contribution limits for retirement savings.