28 Retirement Planning Flashcards
What are 457 Plans?
Deferred compensation plans established by local governments, state governments, and tax-exempt employers.
How do contributions to 457 Plans grow?
They grow on a tax-deferred basis.
When are contributions to 457 Plans taxed?
Contributions do not get taxed until funds are withdrawn from them.
What is a Qualified distribution from a Roth IRA?
Any payment or distribution taken 5 or more years after the IRA was set up, after age 59½, due to disability, for a first home, or to a beneficiary or owner’s estate.
What is Required minimum distribution (RMD)?
An amount that must be taken out of an IRA each year to avoid a 50% excise tax.
What are Simplified Employee Retirement Plans (SEPs)?
Plans that offer business owners a simplified way to contribute to retirement plans for themselves and their employees.
Where do contributions go in a SEP?
Contributions go to IRAs - one for each participant in the plan.
What are Tax-Sheltered Annuities (TSAs)?
Plans that allow employees to make contributions from their current incomes into retirement plans.
How are contributions to TSAs treated for tax purposes?
Contributions are deducted from incomes so contributions and earnings aren’t taxed until they are withdrawn.
What is Vesting?
The process by which employees come to own non-forfeitable rights over employer-provided retirement benefits.
What are Whole life insurance policies?
Insurance policies that provide both insurance and investments, also known as ‘cash-value life insurance.’
What happens upon the policy holder’s death with whole life insurance?
The insurance pays a preset amount.
What can the investments in whole life insurance do?
They build value that may be borrowed against or withdrawn by the insured individual.
