Retirement Flashcards
Keogh Plans. Shortcut: Take the net schedule C income, then:
12.12% for 15% contribution for non-owner employees or
18.59% for 25% contribution for non-owner employees
NHCE vs. HCE ADP/ACP rules
Deferral 1% (×2) 2%
Deferral 2% (×2) 4%
Deferral 3% (+2) 5%
Deferral 4% (+2) 6%
What plan benefits young employees?
Money Purchase
simplest, most flexible plan.no deferrals
SEP
What plan has flexible yearly contributions and can be integrated with social securit
Profit-sharing plan.
VP of marketing earns $200k/yr.Sells paintings over $100k. CAn she fund a SEP?
Yes, limited to 25% of $100k less SS offset of $18,590 (18.59%)
Spouse dies. He had a qualified plan at work. Age 53, may retire early. What can she do with his money?
Since she isn’t certain abour retiring early, best to keep in 401k where you can get money at age 55. She can make a direct rollover into her qualified plan at work.
RMD slow down
If spouse is more than 10 years younger than you, you can use the joint and last survivor table (more favorable than uniform life exp table)
If you want to borrow money to purchase more investments and deduct loan interest you can pledge what as collateral?
1. muni bonds
2. ira
3. common stock
4. money market
Common stock. Ira would be disqualified, mni bond int deduction would be disallowed if pledged.
Coverdell phase outs
$190-$220k
Who do you not have to w/h FICA on?
Kid under 18 in UNincorporated business.
Does John have to w/h in his business? YES s-corp)
Does someone filing Schedule C have to? NO (sole prop/self emp)
What is current death benefit for SS
$255
Social security: spouse can get check if over age ____
60
Social security: Spouse of retired/disabled worker can qualify for Scoial Security payments if:
-age 62 or over or at any age if spouse has child under 16 or over 16 with disability
SS: Dependent benefits available when
Kid is under 19 and FT elem /sec school student
Age 18 with disability
SS: stay at home mom (didn’t work), how much benefit will she get?
1/2 of spouse. When he dies she gets stepped up to his amt.
What is haircut formula for taking SS early?
Number of months before FRA
PIA $ minus. ______________________________ times PIA $
180
What is temporary haircut?
For every $1 you make for each $3 of earned income over $59,520 until full retirement age is reached during 2024.
If they won’t reach full retirement during 2024 it’s deduct $1 for each $2 earned above $22,320.
Faster vesting schedules are …
2 to 6 year graded. *use for retaining EEs
3 year cliff
100% vested w/ 2 yr elig.
ALL DCs
Top heavy Dbs
Age and service for emp to particplate in qualifeid plan is
21 and one year of service.
*special provision allows up to 2 year service requirement but then EE is immediately vested.
Ratio test: plan must cover non highly comp EEs that is at least ____% of HCEs who are covered
70%
Slower vesting schedules are…
3 to 7 yr graded
5 year cliff
100% vested w/ 2 yr elig.
ADP/ACP testing
Short cut:
0 to 2% is “times 2”
2 to 8% is “plus 2”
Defined BENEFIT integration. - excess method…permittted disparity is lesser of base benefit or ____
26.25%
Base 30%. + Perm Disp 26.25% = 56.25
Base 20%. + Perm Disp 20% = 40%
Social Security Wage Base is
$168,600
Defined CONTRIBUTION integration - permitted disparity is lesser of the case contribution % or the ____% formula
5.7%
Base. + Perm Disp = Excess
10. +. 5.7. = 15.7
3. + 3. = 6
8. + 5.7 = 13.7
Permitted Disp: lesser of base contribution % or 5.7%
If employee was $100k over the base (lower worker), it would be 15.7% of $100k plus the base amount
Annual Comp limit
$345,000
Keogh - for sole props and partnerships (Sch C filers)
What is the shortcut?
Net schedule C income
x 12.12 (for 15% contributions)
x 18.59 (for 25% contributions) *Max plan
Loans from qualified plans
Can deduct interest paid on a plan loan if for primary residence BUT if key employees…not deductible.
Alimony is considereder earned income (pre 2019 divorces) DAMN RIGHT
If you cash out Simple in the first 2 years, what is the penalty?
25%, after 2 years it’s 10%
Annuity payout from life insurance after death = you will pay taxes
EX:
100,000 (death benefit). div by (#mos payout) = basis recovery
If pymt is $600 a mo. subtract the basis recovery and multiply by # of mos they paid in year being asked about tax. (CFP board text 1 - see phone pics)
When clients have substantial networth, the cfp test LOVES to get the umbrella insurance (even if term life may be needed)
Capitalization rate for apartment bldg and similar properties is 9%
A stock’s marketability hinges on number of shares traded.
Non-qualified deferred comp plan may have DB or DC structure
Last day of work is march 15th, group health ends March 30, what is last month to sign up for medicare without 10% premium increasue
November (8 mos)
Top have 401k plans must provide min contributions for non-key employees
What are the 444s
401k
403b
457
Simple ira
What are the DB plans?
Pension Plan
Cash Balance
*Comp limit to consider $345k
Add limit NONE - stuff like a pig
Payout limit $245K
What are the DC plans?
Money Purchase
Target Benefit Plan
Profit Sharing Plan (w/ 401k prov)
Stock Bonus Plans
*Comp limit to consider $345k
*Add limit $69k or 100% comp (lesser)
3 columns - what plans take EE deferrals?
What is % limit in middle column?
401k, 403b, 457, Simple
*Comp considered has to be knocked down to $345k and only 25% of comp contribution limit for ER
Safe Harbor 401k
$/$ on first 3% EE deferral and $.50/$1 on next 2% (4% if EE defers 5% of comp).
or
ER can contribute 3%
What type of company cannot create ESOP?
Partnerships (Keogh)
What is Section 415?
DB - max on backend benefit is $275K or 100% of last 3 year average (lesser of)
UBF (uses both factors ) service and salary
UBF - unit benefit formula
*like Daimler
Final average method
Final 3 years
Cops getting OT in their last 3 years to max their benefit for pension
*Remember there is limit $275k to be consider for annual comp
What is HCE?
-greater than 5% owner
or
-earn greater than $155k
What is a key employee?
-greater than 5% owner
-officer with more than $220k comp
-greater than 1% owner & com greater than $155k
Top heavy plans
she wears a 60 DDD bra - which doesn’t even make sense
Top-heavy plans:
If owners/key EEs make each $400k, you take max considered of $345k x = $690k total and rest of employees make $300k
$690K. div. by $990k. = .69%. It’s over 60% so it is top heavy
What is limit for deductible IRA?
77,000 (single)
You can deduct IRA contributions, even if you make 500 million dollars IF you do NOT have a workplace plan (not an active participant)
If one spouse is active participate and the other isn’t, the nonactive can make deductible ira cont if AGI is less than 230k (phased out at 240k)
Active participant - deductible IRAs
Single - 77k-87k
MFJ - 123k-143k
*given on tax tables
Inherited Roth IRAs have RMDs…most is 10 year rule
Roth 401k
no home purchase exception
What income limit for contributing to Roth 401k
NONE
