Podcast
Questions and Answers
How are contributions made to a Roth IRA handled for tax purposes?
How are contributions made to a Roth IRA handled for tax purposes?
Which of these statements concerning Traditional IRAs is CORRECT?
Which of these statements concerning Traditional IRAs is CORRECT?
Under a Traditional IRA, interest earned is taxed:
Under a Traditional IRA, interest earned is taxed:
Within how many days must a Traditional IRA be rolled over to another IRA in order to avoid tax consequences?
Within how many days must a Traditional IRA be rolled over to another IRA in order to avoid tax consequences?
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An example of a tax-qualified retirement plan would be a(n):
An example of a tax-qualified retirement plan would be a(n):
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When a qualified plan starts making payments to its recipient, which portion of the distributions is taxable?
When a qualified plan starts making payments to its recipient, which portion of the distributions is taxable?
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Which of these retirement plans do NOT qualify for a federal income tax deduction?
Which of these retirement plans do NOT qualify for a federal income tax deduction?
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Mike has inherited his father's Traditional IRA. As beneficiary, he will pay ____ taxes on any money withdrawn.
Mike has inherited his father's Traditional IRA. As beneficiary, he will pay ____ taxes on any money withdrawn.
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A rollover from a Traditional IRA to another IRA MUST be done within ___ days to avoid tax consequences.
A rollover from a Traditional IRA to another IRA MUST be done within ___ days to avoid tax consequences.
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All of the following are exempt from the 10% tax penalty for early qualified plan withdrawals EXCEPT:
All of the following are exempt from the 10% tax penalty for early qualified plan withdrawals EXCEPT:
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What kind of annuity is considered when Dana deposits into her individual annuity and her company contributes to a pension plan?
What kind of annuity is considered when Dana deposits into her individual annuity and her company contributes to a pension plan?
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Which of the following employers is required to follow ERISA regulations?
Which of the following employers is required to follow ERISA regulations?
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Who were Keogh plans designed to provide pension benefits for?
Who were Keogh plans designed to provide pension benefits for?
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At what age can Erica, who is 35 years old, begin to receive distributions from her IRA without a tax penalty?
At what age can Erica, who is 35 years old, begin to receive distributions from her IRA without a tax penalty?
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Which benefit enables Rob to defer his current receipt of income to a later date?
Which benefit enables Rob to defer his current receipt of income to a later date?
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Study Notes
Roth IRA
- Contributions to a Roth IRA are not tax deductible.
- Earnings in a Roth IRA are not taxable upon withdrawal if account rules are followed.
Traditional IRA
- Earnings in a Traditional IRA are taxable upon distribution.
- No tax deductions for contributions when distributions are taken if the account holder is over 59 ½.
Rollover Rules
- Traditional IRA rollovers must occur within 60 days to avoid tax penalties.
- A single rollover is allowed without tax consequences in a 60-day window.
Qualified Retirement Plans
- A defined contribution plan is an example of a tax-qualified retirement plan.
- Portions of distributions that are taxable primarily consist of gains rather than contributions.
Distribution and Tax Penalties
- Certain exemptions exist for the 10% tax penalty on early withdrawals, including qualified college expenses and first-time home purchases, except for stock purchases.
- To avoid penalties, individuals may access their retirement funds without incurring costs once they reach age 59 ½.
Annuities and Employer Contributions
- A contribution made by an employee to an annuity with additional employer contributions is classified as a qualified retirement annuity.
ERISA Regulations
- Employers required to follow ERISA regulations include private, for-profit businesses, such as a local electrical supply company with 12 employees.
Keogh Plans
- Keogh plans are designed specifically to provide pension benefits for self-employed individuals.
Income Tax on Inherited IRAs
- Beneficiaries, such as Mike inheriting a Traditional IRA, will pay income taxes on any amounts withdrawn.
Deferred Compensation
- A deferred compensation option allows employees to postpone income and potentially reduce tax burdens by receiving it when in a lower tax bracket.
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Description
Test your understanding of key concepts in retirement plans with this flashcard quiz focused on Chapter 10. This quiz covers important topics such as tax implications of contributions and withdrawals from Roth and Traditional IRAs. Challenge yourself and see how well you know these essential aspects of retirement planning.
