Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

SIE > Retirement / Education > Flashcards

Retirement / Education Flashcards

1
Q

What is the central benefit of tax-deferred growth?

A

Retirement plans, Education savings plans, Retirement account contributions

Tax-deferred growth allows investments to grow without being taxed until withdrawal.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What must retirement account contributions be made in?

A

Cash

This ensures liquidity and compliance with contribution rules.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What strategies should be avoided in retirement accounts?

A

Strategies with unlimited risk

These can lead to significant losses and jeopardize retirement savings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What types of transactions are not allowed in retirement accounts?

A

Short sales, Margin

These transactions involve high risk and are unsuitable for retirement accounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Are municipal bonds suitable for retirement accounts?

A

No

Municipal bonds are generally not suitable due to their tax-exempt status.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the penalty for excess contributions to retirement accounts?

A

6% on the amount over-contributed

This penalty is applied annually until the excess is corrected.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the early withdrawal penalty for retirement distributions before age 59 1/2?

A

10% penalty

This penalty is designed to discourage early withdrawals from retirement accounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are exceptions to the early withdrawal penalty?

A
  • Disability
  • Death
  • First-time home purchase
  • Educational expenses
  • Certain medical expenses

These exceptions allow penalty-free withdrawals under specific circumstances.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are required minimum distributions (RMDs)?

A

Retirement withdrawal requirement

RMDs ensure that retirement funds are distributed and taxed during the account holder’s lifetime.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

At what age do RMDs apply?

A

Age 73

This age is set by current tax laws for mandatory withdrawals from retirement accounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When must the annual amount of RMDs be distributed?

A

Year-end

This ensures compliance with tax regulations regarding retirement account withdrawals.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

When can the first RMD be postponed until?

A

April 1st of the following year

This allows account holders a grace period for their initial withdrawal.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the penalty if RMDs are not taken?

A

25% penalty (10% if taken within 2 years)

This high penalty underscores the importance of complying with RMD rules.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does ERISA stand for?

A

Employee Retirement Income Security Act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the primary purpose of ERISA?

A

Legislation governing qualified plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the minimum participation standards under ERISA?

A

Must offer the plan to all full-time employees

This ensures inclusivity and prevents discrimination against certain employee groups.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Is it permissible to offer an ERISA plan only to executives?

A

No, it would be considered discrimination

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the reporting and disclosure requirements of ERISA?

A

Details of retirement plan must be available in writing

Employees are also provided annual updates.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How must defined benefit plans be funded according to ERISA?

A

Must be funded appropriately

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the vesting requirement under ERISA?

A

Employees must earn employer-provided benefits in a reasonable amount of time (five years or less)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are defined benefit plans?

A

Plans that provide a predetermined retirement benefit based on salary and years of service

Varying contributions are made over time

23
Q

Who benefits most from defined benefit plans?

A

Employees with:
* Higher salaries
* Closest to retirement age

Most beneficial for employees nearing retirement

24
Q

What is a common form of defined benefit plan?

A

Pensions

Pensions pay retirement income until death

25
What are unfunded pension liabilities?
When payouts exceed assets forecasted ## Footnote Indicates financial shortfalls in pension funding
26
What characterizes defined contribution plans?
Defined contributions with an unknown benefit at retirement ## Footnote The final benefit depends on investment performance
27
What is a 401(k) plan?
A qualified retirement plan for private (non-government) companies ## Footnote Allows employees to save for retirement with tax advantages
28
What is a Solo 401(k) plan?
A qualified retirement plan for self-employed businesses with no employees ## Footnote Working spouses do not count towards employee status
29
What is a 403(b) plan?
A qualified retirement plan for non-profit organizations, also known as tax-sheltered annuities ## Footnote Similar to 401(k) plans but tailored for non-profits
30
What are Keogh (HR-10) plans?
Qualified retirement plans for self-employed businesses ## Footnote Contribution limits in 2025 are lesser of $70,000 or 25% of income
31
What are profit-sharing plans?
Qualified retirement plans where employers share a portion of profits ## Footnote Employers are under no obligation to contribute
32
What are money purchase plans?
Qualified retirement plans where employers must contribute a fixed percentage of salary annually ## Footnote Provides predictable contributions for retirement savings
33
What are SEP and SIMPLE IRAs?
Qualified retirement plans for small businesses with higher contribution limits than traditional or Roth IRAs ## Footnote Designed to simplify retirement savings for small business owners
34
What is a deferred compensation plan?
A non-qualified retirement plan allowing senior employees to defer compensation until retirement ## Footnote Provides tax benefits and investment opportunities
35
What is a 457 plan?
A retirement plan for government and certain non-profit employees allowing pre-tax contributions and tax-deferred growth ## Footnote No early withdrawal penalty applies
36
What are the contribution limits for Traditional IRAs in 2025?
The lesser of $7,000 or annual earned income ## Footnote Individuals aged 50 and older can contribute an additional $1,000.
37
What is the tax treatment of distributions from Traditional IRAs?
100% taxable distributions
38
What are the conditions for deductible Traditional IRA contributions if covered by a qualified plan?
Deductible if mid-low income, non-deductible if high income
39
What type of contributions does a Roth IRA allow?
Non-deductible contributions
40
What are the conditions for tax-free distributions from a Roth IRA?
Age 59 1/2 or older and Roth IRA is aged 5 years
41
What is the contribution limit for Roth IRAs in 2025?
The lesser of $7,000 or annual earned income ## Footnote Contribution limits apply to both Roth and Traditional IRAs combined.
42
Can individuals with high income contribute to Roth IRAs?
Cannot contribute if high income
43
What additional contribution can individuals aged 50 and older make to Roth IRAs?
$1,000 more
44
What is a Spousal IRA?
Allows non-working spouse contribution
45
What is a Roth 401(k)?
Qualified workplace plan with a similar tax structure to a Roth IRA
46
What type of insurance provides coverage for the entire life of the policyholder?
Variable life insurance ## Footnote Variable life insurance offers lifelong coverage, unlike term insurance which is limited to a specific period.
47
What are the premium characteristics of variable life insurance?
Fixed premiums ## Footnote This means that the premium amount does not change over time.
48
What benefit is guaranteed in a variable life insurance policy?
Guaranteed death benefit ## Footnote The death benefit is the amount paid to beneficiaries upon the policyholder's death.
49
In variable life insurance, where is the cash value invested?
In a separate account ## Footnote This allows for potential growth based on investment performance.
50
How does the cash value in variable life insurance grow?
Based on investment performance ## Footnote The growth is not guaranteed and is subject to market fluctuations.
51
Who is subject to investment risk in variable life insurance?
The policyholder ## Footnote The policyholder assumes the risk associated with the investments made in the separate account.
52
What options are available for the cash value in a variable life insurance policy?
Withdrawn, borrowed, returned to the insurance company upon death, kept upon surrender of the policy, retained and potentially paid with a death benefit ## Footnote These options provide flexibility in managing the cash value.
53
What is the classification of variable life insurance in terms of financial instruments?
Considered a security ## Footnote This classification is due to the investment component of the cash value.

SIE (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions