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Questions and Answers
How are Roth IRA distributions normally taxed?
How are Roth IRA distributions normally taxed?
How long does an individual have to 'rollover' funds from an IRA or qualified plan?
How long does an individual have to 'rollover' funds from an IRA or qualified plan?
What is the tax consequence of a distribution sent to an employee who rolled it over into an IRA?
What is the tax consequence of a distribution sent to an employee who rolled it over into an IRA?
What does a 401(k) plan generally provide its participants?
What does a 401(k) plan generally provide its participants?
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In a qualified retirement plan, the yearly contributions to an employee's account:
In a qualified retirement plan, the yearly contributions to an employee's account:
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What are the tax consequences when an individual withdraws $50,000 from a Qualified Profit-Sharing Plan?
What are the tax consequences when an individual withdraws $50,000 from a Qualified Profit-Sharing Plan?
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Which plan is intended to be used by a sole proprietor and the employees of that business?
Which plan is intended to be used by a sole proprietor and the employees of that business?
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Post-tax dollar contributions are found in:
Post-tax dollar contributions are found in:
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Which of these retirement plans can be started by an employee, even if another plan is in existence?
Which of these retirement plans can be started by an employee, even if another plan is in existence?
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An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
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Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
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A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
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If an individual working part-time has an IRA, what is the maximum deductible IRA contribution allowable with an annual income of $25,000?
If an individual working part-time has an IRA, what is the maximum deductible IRA contribution allowable with an annual income of $25,000?
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Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
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An employer that offers a qualified retirement plan to its employees is eligible to:
An employer that offers a qualified retirement plan to its employees is eligible to:
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What is the income tax withholding requirement for an individual receiving eligible rollover funds from a profit-sharing plan?
What is the income tax withholding requirement for an individual receiving eligible rollover funds from a profit-sharing plan?
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What is the marital deduction qualification for a widow who received an IRA from her deceased spouse?
What is the marital deduction qualification for a widow who received an IRA from her deceased spouse?
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What is the excise tax rate that the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions?
What is the excise tax rate that the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions?
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What is the penalty tax for premature IRA distributions?
What is the penalty tax for premature IRA distributions?
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What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
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Which federal taxes apply if a 55-year-old received a $30,000 distribution from a previous employer's 401(k) plan, minus $6,000 withholding?
Which federal taxes apply if a 55-year-old received a $30,000 distribution from a previous employer's 401(k) plan, minus $6,000 withholding?
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Which of the following is TRUE about a qualified retirement plan that is 'top heavy'?
Which of the following is TRUE about a qualified retirement plan that is 'top heavy'?
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A qualified profit-sharing plan is designed to:
A qualified profit-sharing plan is designed to:
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Which product would best serve a retired individual looking to invest a lump sum of money through an insurance company?
Which product would best serve a retired individual looking to invest a lump sum of money through an insurance company?
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In an individual retirement account (IRA), rollover contributions are:
In an individual retirement account (IRA), rollover contributions are:
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Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
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What type of employee welfare plans are not subject to ERISA regulations?
What type of employee welfare plans are not subject to ERISA regulations?
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Traditional individual retirement annuity (IRA) distributions must start by:
Traditional individual retirement annuity (IRA) distributions must start by:
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If Tom has a qualified retirement plan that is currently considered to be 80% 'vested', how can this be interpreted?
If Tom has a qualified retirement plan that is currently considered to be 80% 'vested', how can this be interpreted?
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All of the following statements about traditional individual retirement accounts are false EXCEPT:
All of the following statements about traditional individual retirement accounts are false EXCEPT:
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When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
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A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:
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Study Notes
Roth IRA Distributions
- Distributions received from a Roth IRA are tax-free.
- A 10% penalty tax can apply to early withdrawals.
IRA and Qualified Plan Rollover
- Funds from an IRA or qualified plan must be rolled over within 60 days.
- Failure to adhere to this timeframe may result in tax penalties.
Tax Consequences on 401(k) Distributions
- Direct distributions from a 401(k) account are subject to federal income tax withholding.
- If the funds are not rolled over, ordinary income tax is assessed on the distribution.
Salary-Deferral Contributions
- 401(k) plans primarily offer salary-deferral contributions to employees.
- Participants can contribute a portion of their pre-tax income for retirement savings.
Contribution Limits
- Contributions to qualified retirement plans are restricted to maximum levels set by the IRS.
- Employers may make tax-deductible contributions to these plans.
Withdrawals from Qualified Plans
- An individual withdrawing funds from a Qualified Profit-Sharing Plan before the age of 59 1/2 faces income tax and a 10% penalty.
Keogh Plan
- The Keogh Plan is tailored for sole proprietors and their employees, providing a means for retirement savings that is beneficial for self-employed individuals.
Post-Tax Contributions
- Roth IRA investments allow for post-tax dollar contributions, leading to tax-free growth.
Individual Retirement Accounts
- Employees can establish an Individual Retirement Account (IRA) regardless of other retirement plans in place.
Age for Withdrawals without Penalty
- Withdrawals from an IRA can be made without penalty starting at the age of 59 1/2.
Ownership of 403(b) Plans
- The employee is generally regarded as the owner of a 403(b) tax-sheltered annuity.
Trustee-to-Trustee Transfers
- This type of transfer allows participants to avoid mandatory income tax withholding on rollover amounts.
IRA Contribution Limits
- For individuals with an annual income of $25,000, the maximum deductible IRA contribution is equal to their income.
Early Distribution Tax Penalty
- Early withdrawals from an IRA before age 59 1/2 incur both ordinary income tax and a 10% penalty.
Employer Contributions
- Employers offering a qualified retirement plan can make fully tax-deductible contributions.
Tax Withholding on Rollover Funds
- For eligible rollover distributions from a profit-sharing plan, 20% income tax is withheld automatically.
Marital Deduction in IRAs
- Surviving spouses of IRA owners can take advantage of the marital deduction regarding the inherited account.
Excise Tax for Not Taking Minimum Distributions
- The IRS imposes a 50% excise tax on individuals aged 70 1/2 or older who fail to take required minimum distributions.
SIMPLE Retirement Plans
- Employers can offer a SIMPLE plan to a maximum of 100 employees earning at least $5,000.
Federal Tax on 401(k) Distributions
- If a 55-year-old takes a distribution from a 401(k) and does not roll it over, they will incur federal taxes on the full distribution amount.
Top Heavy Retirement Plans
- A retirement plan is considered "top heavy" if more than 60% of assets are allocated to key employee accounts.
Profit-Sharing Plans
- These plans allow employees to share in the company's profits, aligning employee interests with company performance.
Best Investment for Lump-Sum Savings
- Annuities are suitable for retirees wishing to invest a lump sum through an insurance company.
Rollover Contributions to IRAs
- Rollover contributions to traditional IRAs are not subject to dollar amount limits.
IRA Beneficiary Rules
- If an IRA owner dies, the account can be rolled into the surviving spouse's IRA without a surrender charge.
ERISA Regulations
- Church plans are exempt from ERISA regulations, providing more flexibility.
Required Minimum Distributions
- For traditional IRAs, distributions must commence by April 1st of the year following the participant's 70 1/2 birthday.
Vesting in Retirement Plans
- If an employee is 80% vested in their retirement plan, they could lose 20% of the funds if their employment ends.
Traditional IRA Penalties
- A 10% penalty applies to withdrawals from traditional IRAs made before age 59 1/2.
Tax Withholding on Direct IRA Transfers
- No taxes are withheld when funds are transferred directly from one IRA to another.
Definition of Profit-Sharing Plans
- A profit-sharing plan allocates part of a company’s net income for distribution to eligible employees.
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Description
Test your knowledge on retirement plans with these flashcards. Topics include Roth IRA distributions, fund rollover timelines, and more. Perfect for anyone looking to enhance their financial literacy regarding retirement options.
