Chapter 3

Question 0

403 b

Answer 0

retirement plan similar to a 401 k plan, but one that is offered by non-profit organizations, such as hospitals, schools, and some charitable organizations, rather than corporations; employees set aside tax-deferred dollars

Question 1

401 k

Answer 1

defined contribution plan offered by a corporation to its employees, which allows employees to set aside tax-deferred incomes for retirement purposes; in some cases, employers will match their contributions.

Question 2

457

Answer 2

non-qualified, deferred compensation plan established by state and local government for tax-exempt government agencies and tax-exempt employers; eligible employees are allowed to make salary deferral contributions to the 457 plan; earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan.

Question 3

529

Answer 3

college savings plan that allows individuals to save on a tax-deferred basis in order to fund future college and graduate school expenses of child or beneficiary; generally sponsored by a state, these are professionally managed investments

Question 4

custodian

Answer 4

one who is responsible for an account listed in someone else’s name

Question 5

direct transfer

Answer 5

movement of tax-deferred retirement plan money from one qualified plan or custodian to another; results in no immediate tax liabilities or penalties, but requires IRS reporting

Question 6

ESA

Answer 6

after-tax college fund that grows tax-free for educational uses; eligibilty based on parents’ annual income

Question 7

IRA

Answer 7

tax-deferred arrangement for individuals with earned income and their non-income-producing spouses; growth is not taxed until money is withdrawn; contributions to IRA are often tax-deductible

Question 8

Pre-Paid Tuition

Answer 8

paying for college ahead of time by accumulating units of tuition

Question 9

rollover

Answer 9

movement of funds from a tax-deferred retirement plan from one qualified plan or custodian to another; incurs no immediate tax liabilities or penalties, but requires IRS reporting

Question 10

ROTH IRA

Answer 10

retirement account funded with after-tax dollars that subsequently grows tax free

Question 11

SEPP

Answer 11

pension plan in which both the employee and the employer contribute to an individual retirement account; also available to the self-employed

Question 12

tax favored dollars

Answer 12

money that is working for you, either tax-deferred or tax-free, within a retirement plan

Question 13

UGMA

Answer 13

legislation that provides a tax-effective manner of transferring property to minor without the complications of trusts or guardianship restrictions

Question 14

UTMA

Answer 14

law similar to the UGMA that extends the definition of gifts to include real estate, paintings, royalties, and patents

Question 15

What is an another word for UGMA?

Answer 15

Uniform Gifts to Minors Act

Question 16

What is an another word for UTMA?

Answer 16

Uniform transfers to minors act

Question 17

what is baby step 4?

Answer 17

invest 15% of your household income into roth iras and pre-tax retirement plans

Question 18

Tax-favored means that the investment is in a?

Answer 18

qualified plan or has a special tax treatment

Question 19

What is an another name for IRA?

Answer 19

Individual Retirement Arrangement

Question 20

What is an another name for SEPP?

Answer 20

Simplified Employee Pension Plan

Question 21

What does Social Security or SS also stand for according to Davey Ramsey?

Answer 21

Social Insecurity

Question 22

What are the three “NEVERS” of College Savings?

Answer 22

1. never save using insurance
2. never save using saving bonds
3. never save using pre-paid tuition

Question 23

What are two qualified plans during work that one should invest in?

Answer 23

IRA

SEPP

Question 24

What is the maximum annual contribution for income earners in the IRA as of 2008?

Answer 24

$5000

Question 25

What is the IRA not at a bank?

Answer 25

investment

Question 26

The Roth IRA is an ____-tax IRA that grows tax____.

Answer 26

after,

free

Question 27

What are some good things about the Roth IRA?

Answer 27

• more choices
• high bracket at retirement
• no taxes
• tons of flexibility

Question 28

What is the one main thing about the SEPP?

Answer 28

that a self-employed person may deduct up to 15% of their net profit on the business by investing in a SEPP

Question 29

What are three different kind of matching retirement plans?

Answer 29

401 k
103 b
457