Questions and Answers
A Roth IRA owner must be at least what age in order to make tax-free withdrawals?
When a qualified plan starts making payments to its recipient, which portion of the distributions is taxable?
Gains
Which of the following would disqualify a company's retirement plan from receiving favorable tax treatment?
Under a Traditional IRA, when is interest earned taxed?
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Which of the following is NOT a federal requirement of a qualified plan?
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A rollover from a Traditional IRA to another IRA MUST be done within ___ days to avoid tax consequences.
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As beneficiary, Mike will pay ____ taxes on any money withdrawn from his father's traditional IRA.
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All of the following are exempt from the 10% tax penalty for early qualified plan withdrawals EXCEPT:
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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?
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What kind of annuity is Dana considered to have if she deposits a percentage of her income into her individual annuity, while her company contributes to a separate pension plan?
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An example of a tax-qualified retirement plan would be a(n):
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What benefit enables Rob to defer his current receipt of income to a later date?
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Which of these statements concerning Traditional IRAs is CORRECT?
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Which of the following is NOT a federal requirement of a qualified plan?
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Which of the following employers is required to follow ERISA regulations?
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Which of the following would disqualify a company's retirement plan from receiving favorable tax treatment?
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Which of these retirement plans do NOT qualify for a federal income tax deduction?
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How are contributions made to a Roth IRA handled for tax purposes?
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A rollover from a Traditional IRA to another IRA MUST be done within ___ days to avoid tax consequences.
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Within how many days must a rollover be completed in order to avoid being taxed as current income?
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Who were Keogh plans designed to provide pension benefits for?
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It is true that a local electrical supply company with 12 employees must follow ERISA regulations.
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All of the following are exempt from the 10% tax penalty for early qualified plan withdrawals EXCEPT:
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Which benefit fits the description of allowing an employee to defer income to be paid at a later date?
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Study Notes
Roth IRA Withdrawals
- Tax-free withdrawals from a Roth IRA require the owner to be at least 59 1/2 years old and have held the account for 5 years.
Taxable Portions of Qualified Plans
- When payments begin from a qualified plan, only the gains portion of the distributions is taxable.
Retirement Plan Tax Treatment
- A company's retirement plan can be disqualified from favorable tax treatment if it is considered temporary.
Traditional IRA Taxation
- Interest earned in a Traditional IRA is taxed at the time of distribution.
Federal Requirements for Qualified Plans
- Unlimited contributions by employees are NOT a federal requirement for a qualified plan.
Rollover Timelines
- A rollover from a Traditional IRA to another IRA must be completed within 60 days to avoid tax consequences.
Inherited Traditional IRA
- Beneficiaries of inherited Traditional IRAs must pay income taxes on any amounts withdrawn.
Early Withdrawal Penalties
- Exceptions to the 10% tax penalty for early withdrawals from qualified plans include qualified college expenses, first-time home purchases, and death of the participant, but stock purchases do not qualify.
ERISA Regulations
- Employers with a retirement plan are required to comply with ERISA regulations if they have 12 or more employees, such as a local electrical supply company.
Keogh Plans
- Keogh plans are specifically designed to provide pension benefits for self-employed individuals.
Qualified Retirement Annuities
- Annuities where employees contribute and companies also contribute to a separate pension plan are categorized as Qualified Retirement Annuities.
Tax-Qualified Retirement Plans
- A defined contribution plan is an example of a tax-qualified retirement plan.
Deferred Compensation
- Deferred compensation options allow employees to delay receiving income until a later date, often when they may be taxed at a lower rate.
Tax Treatment of Roth IRA Contributions
- Contributions to a Roth IRA are not tax-deductible.
Exemptions from Early Withdrawal Penalties
- Early withdrawals from qualified plans incur penalties unless they fall under certain categories, with stock purchases being an exception to this exemption.
Importance of Rollover Deadlines
- Completing a rollover within 60 days is crucial to avoid current income taxation on IRA funds.
Employer ERISA Obligations
- A local electrical supply company with 12 employees must adhere to ERISA regulations, in contrast to smaller employers like churches or local governments with certain thresholds.
Misunderstandings About IRAs
- Questions about Traditional IRAs correct common misconceptions, such as that earnings are taxable upon withdrawal.
Notable Differences
- Roth IRAs do not qualify for federal income tax deductions, distinguishing them from other retirement options like Traditional IRAs and Keogh Plans.
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Description
Test your knowledge about retirement plans with these flashcards. Learn about Roth IRAs, tax-free withdrawals, and the taxable portions of retirement distributions. Perfect for those looking to deepen their understanding of retirement financial planning.
