chapter 4

Question 1

Personal uses of life insurance

Answer 1

1. Survivor protection
2. estate creation
3. estate conservation
4. cash accumulation
5. liquidity

Question 2

Business uses of life insurance

Answer 2

1. Key employee (if someone is the goat at sales and they die you could be totally boned)
2. Buy - Sell agreement - determines what will be done with a business in the event that an owner die or becomes disabled.

Question 3

Qualified Plan requirments

Answer 3

1. exclusively for employees and their beneficiaries
2. formally written and communicated
3. cannot discriminate
4. plans are permanent

Question 4

Traditional IRA

Answer 4

What you have to have:
earned income
Contributions are usually fully deductible
Taking anything out before 59 1/2 will be 10% and have to start taking money out at 70 1/2

Question 5

Roth IRA Contributions

Answer 5

Contributions made afer tax and can continue to take money out after age 70 1/2.

Question 6

Roth IRA withdrawals

Answer 6

Can take money out at any time. No tax no penalty.

Question 7

Retirment plans (5)

Answer 7

HR - 10 Keogh 
SEP 
SIMPLE
401(k)
403(b) - TSA

Question 8

HR - Keogh

Answer 8

Self employed only. Employer matches employees contribution

Question 9

SEP

Answer 9

self employed/ small employer. Employee and employer contributes

Question 10

SIMPLE

Answer 10

100 or fewer employees. Employer matches contribution

Question 11

401k

Answer 11

any employer. Employer can match or choose a set amount.

Question 12

403(b) TSA

Answer 12

very special type. This is nonprofit organization employer (church or Red Cross or something like that)

Question 13

Not tax deductible on life products

Answer 13

premiums and policy loans

Question 14

not taxable on life products

Answer 14

policy dividends and death benefit

Question 15

taxable on life products

Answer 15

excess cash value and interest on dividends

Question 16

Taxation of deferred annuities

Answer 16

Tax - deferred accumulation (why a lot of people like it)

early withdrawals are not good. early withdrawals are 10% penalty

Question 17

Premature annuity distrubtion

Answer 17

aka the 59 1/2 rule. IRA is subject to income taxation in the year the withdrawal is made.