final project

Question 1

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Answer 1

supplemental plans- typically available for higher level employees to accumulate money after they have maxed out their qualified plans (employer-sponsored retirement plans that satisfy requirements in the Internal Revenue Code for receiving tax-deferred treatment.)
profit sharing: - is popular, Employee receives a percentage of companies earnings, incentivizing the employee
thrift & savings plan: - Agreement by the employer to match a percentage of employees funds contributed to retirement accounts BUT earnings on the savings and the employers contributions are not taxed until the employee withdraws their funds.

401k plan (Most popular): Employer must match a percentage of what employee contributes & Taxes on contributions and account earnings are deferred until the funds are withdrawn

Question 2

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Answer 2

self-directed retirement programs
- eant for IRAS and the self employed
- Keogh plan- self-employed people make specified payments deducted from their taxable income (thus, they reduce the tax bills for self-employed individuals)
Keogh accounts can be opened at banks, mutual funds, etc. and annual contributions need to be made at the time their tax returns are filed. (but people who are self employed full/part time can also register)

SEP plans- aimed at small business owners (especially those with no employees) and have the same features as a Keogh account

All contributions & investment earnings must stay in the account until the individual turns 59.5 and can stay, earning tax free income until the person is 70.5, (then they must withdraw funds unless they are still employed.)

Question 3

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Answer 3

Open to any working American where they contribute a specified amount each year ( simply designed to encourage retirement savings)
Traditional IRA- can be opened by anyone without a retirement plan at their place of employment (regardless of income level) & all account earnings are tax free until they are withdrawn (and then ordinary tax rates will apply)
Nondeductible (after-tax) IRA- open to anyone, but only after-tax contributions are made, when withdrawn, it is not subject to tax (exception: fund withdrawn before age 59.5 may be subject to the 10% penalty)
Roth IRA- can be opened by couples filing jointly with adjusted gross incomes up to 199,000 (and for single people, 135,000) whether or not they have retirement/pension plans. !!All withdrawals are tax free so long it’s been open for at least 5 years and individual is over 59.5!!

Question 4

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Answer 4

*premiums=money used to buy annuity
Annuities are investment products created by life insurance companies that provide a series of payments over time, provide protection against outliving retirement funds
Accumulation period: premiums are paid towards the purchase of an annuity
Distribution period: annuity payments are made to an annuitant
Benefits consist of 3 sections: principal (premium amounts paid by the annuitant) , interest (amount earned on the funds between the times they’re paid and distributed), and survivorship (insurance product for couples that continues to make regular payments as long as one spouse lives. )
The interesting earnings on annuity are tax free because all funds must be made with after-tax dollars