Questions and Answers
Post-tax dollar contributions are found in?
What is a retirement plan that sets aside part of the company's net income for distributions to qualified employees?
Profit-sharing 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?
100
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid mandatory income tax withholding on the transfer amount.
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What deduction qualifies the widow of a deceased IRA account holder?
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Which plan is intended to be used by a sole proprietor and the employees of that business?
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All of the following statements about traditional individual retirement accounts are false EXCEPT: 10% penalty is applied to withdrawals before age 59 1/2.
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What happens to traditional individual retirement accounts after age 59 1/2?
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What is the penalty tax for premature IRA distributions?
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If an individual working part-time has an annual income of $25,000, what is the maximum deductible IRA contribution allowable?
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When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
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Which taxes apply if an IRA participant receives distributions prior to age 59 1/2?
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If the owner of an IRA names their spouse as beneficiary but then dies before any distributions are made, the account can be rolled into the surviving spouse's IRA.
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What are the yearly contributions to an employee's account in a qualified retirement plan restricted by?
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What type of employee welfare plans are not subject to ERISA regulations?
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How long does an individual have to 'rollover' funds from an IRA or qualified plan?
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What is a qualified profit-sharing plan designed to do?
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If a 55 year old withdraws $30,000 from a previous employer's 401k plan without rolling over, what taxes apply?
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What eligibility does an employer get by offering a qualified retirement plan to its employees?
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Which retirement plan can be started by an employee even if another plan is in existence?
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Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
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When must traditional individual retirement annuity (IRA) distributions start?
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In an individual retirement account (IRA), rollover contributions are limited by dollar amount.
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What is the income tax withholding requirement for a participant personally receiving eligible rollover funds from a profit-sharing plan?
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What happens if an individual at the age of 45 withdraws $50,000 from his Qualified Profit-Sharing Plan?
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At what age can an IRA owner start making withdrawals without being subjected to a tax penalty?
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How are Roth IRA distributions normally taxed?
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Study Notes
Contributions and Accounts
- Post-tax dollar contributions are primarily associated with Roth IRAs.
- Traditional IRAs impose a 10% penalty for withdrawals before age 59 1/2.
- For individuals earning at least $5,000, a SIMPLE retirement plan can involve up to 100 employees.
- Roth IRA distributions are tax-free when taken.
Retirement Plans and Transfers
- Profit-sharing plans allocate a portion of company income for employee distributions.
- A trustee-to-trustee transfer of rollover funds allows participants to avoid mandatory income tax withholding.
- Keogh Plans cater specifically to sole proprietors and their employees.
Taxes and Penalties
- Premature IRA distributions incur a 10% penalty tax.
- Individuals under 59 1/2 face ordinary income tax plus a 10% penalty on pre-age 59 1/2 distributions.
- If no rollover occurs, an individual faces taxes and a 10% penalty on distributions from a 401(k) plan.
Rollovers and Withdrawals
- Rollover contributions in an IRA are not limited by a dollar amount.
- Participants have a 60-day window to complete rollovers from IRAs or qualified plans.
- Withdrawals can begin without incurring penalties at age 59 1/2.
Specific Retirement Plan Features
- Qualified profit-sharing plans allow employees to share in company profits.
- Employers offering qualified retirement plans can make tax-deductible contributions.
- Annuities are suitable for retired individuals wishing to invest a lump sum.
Beneficiaries and Distributions
- If an IRA owner dies, the account can be rolled into the surviving spouse's IRA.
- Traditional IRA distributions must commence by April 1 following the individual's 70 1/2 birthday.
Compliance and Regulations
- Church plans are considered employee welfare plans exempt from ERISA regulations.
- Income tax withholding of 20% applies to eligible rollover funds received personally from profit-sharing plans.
Summary and Key Points
- Maximum deductible IRA contributions for an individual earning $25,000 are capped at their annual income.
- An individual can participate in both employer-sponsored plans and An Individual Retirement Account (IRA) simultaneously.
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Description
Test your knowledge on retirement plans with these flashcards! This quiz covers key terms and concepts such as Roth IRAs and profit-sharing plans. Perfect for students preparing for an exam or anyone looking to brush up on retirement planning terminology.
