401(K) Flashcards
1
Q
How are distributions from
Roth 401(k), Roth 403(b), or Roth 457
plans treated?
A
-
Distributions are tax-free if they are qualified distributions, meaning that they meet both of the following requirements:
- Account open for 5 years
- Made after age 59, disability, or death
- Distributions that are not qualified are taxed on pro-rata basis consisting of income and return of basis.
2
Q
Define
“Employment Taxes”
A
- FICA tax is the money that is taken out of workers’ paychecks to pay older Americans their Social Security retirement and Medicare (Hospital Insurance) benefits.
- It is a mandatory payroll deduction.
- Two separate taxes are added together and treated as one amount that is referred to as “payroll taxes” or FICA.
