Retirement Plans Flashcards

1
Q

Inheriting an IRA

A

Spouses - may roll IRA over into their own IRA or continue to own as beneficiary

Non-spouses - Several Options:

  • Lump-Sum Distribution
  • 5-year payout
  • Take RMD’s over the beneficiaries life expectancy
  • Take RMD’s based on the life expectancy of the oldest beneficiary
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2
Q

Coverdell / Educational IRA

A

Max contribution = $2k/yr

Money goes in after-tax and grows tax-deferred

Owned by student

Funds must be used for education purposes

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3
Q

529 plans

A

pre-paid tuition plan the individual locks in the tuition rate at a school and begins to make payments in advance to pay for tuition.

If a person doesn’t get into the school they can use those funds to pay for a different school

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4
Q

College Savings Account

A

Saving for when a person is going into college

Funds must be used for educational expenses. Otherwise, withdrawals are taxable.

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5
Q

Keogh

A

Qualified Plans for self-employed individuals

max contribution = 20% of pre-tax income OR 25% of after tax income. up to the contribution limit

If the business owner contributes money into a Keogh they would be required to do the same for their full-time employees

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6
Q

TSA / TDA (Tax sheltered annuities / Tax deffered account)

A

for public employees

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7
Q

Corporate Plans (Deferred Compensation Plans)

A

100% funded by the employee not company.

Types:
Pension
Defined Benefit
Defined Contribution
Profit-Sharing
401k
Payroll deduction plan
Salary Reduction Plan
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8
Q

Defined Benefit

A

All investment risk bared by the company. Tells the employee what the benefit will be from the beginning

Very expensive for the employer

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9
Q

Defined Contribution Plan

A

Benefit amount unknown at the start. Employer contributes to a plan for the employee

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10
Q

Profit-Sharing

A

Employee given stock in the company

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11
Q

401k

A

Usually a defined contribution plan

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12
Q

Payroll Deduction Plan

A

Is a non-qualified plan employees talk to payroll and tell them to place $___ of their checks into a mutual fund plan

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13
Q

Salary Reduction Plan

A

is a qualified plan established by the employer

contributing a portion of the employees check to a 401k/ pension plan prior to taxes

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14
Q

ERISA (Employee Retirement Income Security Act of 1974)

A

All private sector pension plans are regulated by ERISA

Regulates how pension plans are administered for the benefit of employees

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15
Q

ERISA 404c Safe Harbor

A

This requires the plan administrators to provide multiple funds to the employees in the fund so they can pick and choose their investments.

Minimum requirements:
fund for Safety
fund for Income
fund for Growth

makes it so the employee can sue for poor performance

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16
Q

Health Savings Account

A

employee and/or employer may contribute

If a person wants to use this fund to pay for medications they must be prescribed by a doctor

growth may be used tax-free

passes to the spouse as their own plan

If person is eligible on December 1st they may make a full contribution for that year.

17
Q

Rollover

A

Clients take possession of funds and can spend it

can rollover once per year

has 60 days to replace funds before they must pay taxes and penalties

18
Q

Transfer

A

Funds are moved between custodians

No limit to how many times a year it can be transferred

Funds are transferred directly from company to company and the client doesn’t ever take possession of them

19
Q

Traditional IRA / Qualified plans

A

IRS approval required

withdrawals 100% taxed as ordinary income

20
Q

Roth IRA / Non- qualified plans

A

contributions are post-tax,
Growth is tax-deferred
IRS approval NOT required
withdrawals growth only is taxed as ordinary income