SIE (Securities Industry Essentials) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Ace your Securities Industry Essentials (SIE) Exam with Examzify! Our practice exam features flashcards, multiple-choice questions with detailed explanations, and insightful tips to ensure your success.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

At withdrawal, pre-tax contributions and earnings in a traditional IRA are:

Not taxed
Taxed at a reduced rate
Taxed at the capital gains rate
Taxed at the investor's ordinary income rate

The correct answer is: Taxed at the investor's ordinary income rate

Withdrawals from a traditional IRA are taxed at the investor's ordinary income rate. This is because contributions to a traditional IRA are made with pre-tax dollars, and therefore are not taxed when they are initially contributed. However, when the funds are withdrawn during retirement, they are treated as taxable income at the investor's ordinary income tax rate. This is different from Roth IRAs, which are funded with after-tax dollars and thus have tax-free withdrawals in retirement. Options A, B, and C are incorrect because they do not take into account the fact that traditional IRA withdrawals are taxed as ordinary income.