Retirement

Question 1

What standards must retirement plans reach to have beneficial tax status?

Answer 1

Be a Qualified Plan meeting ERISA

Question 2

Two types of nonqualified plan?

Answer 2

Payroll deduction plans and Deferred Compensation

Question 3

Corporate pension plans, profit-sharing plans, IRAs and Keogh plans are all types of…

Answer 3

Qualified plans.

Question 4

What’s the maximum contribution to an IRA?

Answer 4

Max of $5,500 or total earned income for the year.
For 50+ they can catch up with additional $1k/year.
No contributions after 70 1/2

Question 5

Married couples and IRAs…

Answer 5

Separate accounts. Working person may deposit non-working spouse’s contribution for them.

Question 6

Withdrawals from an IRA…

Answer 6

• Without penalty, begin at 59.5; must start at 70.5
• Premature withdrawal subject to 10% penalty and amount included on tax return
• Early withdrawal without penalty allowable under certain circumstances (health)

Question 7

What’s a Roth IRA?

Answer 7

• Contributions not deductible
• Qualified distributions are tax free
• eligibility phased out for high earners

Question 8

Keogh HR10 plans cover who?

Answer 8

Self-employed.
Contribute to lower of $51k or annual compensation.
Deductible contributions are lower of 20% of compensation or $51k.

Question 9

How are distributions from a Keogh plan taxed?

Answer 9

As ordinary income.

Non-deductible contributions are not taxed when distributed.

Question 10

What’s a 529 plan?

Answer 10

Savings vehicle for future higher education expenses.
Contributions after tax.
Qualified withdrawals for HE are tax free.

Question 11

Tax rules on gifting?

Answer 11

Tax free gift to any one person in one year capped at $14k.

Initial gift of $70k allowed into 529 plan – treated as if made over a five year period.

Question 12

What’s a rollover?

Answer 12

If you get a lump sum distribution from a qualified retirement plan – can be rolled over to an IRA within 60 days without any tax liability.

Question 13

Restrictions on contributions to Roth IRA?

Answer 13

• no upper age limit
• retirement benefits and investment income not eligible
• max of 100% earned income or $6,500 (limit plus $1k catchup)

Question 14

How is rental income treated when calculating pension contributions?

Answer 14

It is NOT considered earned income and can’t be contributed to an IRA