General Securities Representative (Series 7) Practice Exam

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When must a person begin taking withdrawals from a qualified retirement plan?

By April 1 after reaching 65
By April 1 after reaching 70
By April 1 after reaching 70 1/2
By December 31 after turning 72

The correct answer is: By April 1 after reaching 70 1/2

The requirement to begin taking withdrawals from a qualified retirement plan, such as a traditional IRA or a 401(k), is linked to specific age milestones. The correct choice indicates that an individual must start taking these withdrawals by April 1 after reaching the age of 70 ½. This rule is known as the Required Minimum Distribution (RMD) rule, which was established to ensure that individuals eventually pay taxes on their retirement savings, as these accounts typically carry tax-deferred growth. The age of 70 ½ was the threshold set prior to the changes introduced by the SECURE Act of 2019, which moved the starting age for RMDs to 72 for individuals born after June 30, 1949. However, under the older rules, a person reaching 70 ½ would have needed to begin withdrawing funds or face penalties. Thus, the choice that states "By April 1 after reaching 70 ½" aligns with the pre-SECURE Act regulation regarding the RMDs, demonstrating the importance of knowing both historical and current requirements in retirement planning.