Retirement Plans Flashcards
Qualified Retirement Plan/Account
Receive favorable tax treatment from the IRS
Life insurance generally can’t be used in a…
Qualified retirement plan
Annuities might be used to fund or distribute money from a…
Qualified retirement plan in various ways
Non-Qualified Retirement Plan/Account
May not receive favorable tax treatment
Employees and employers can deduct retirement plan contributions from…
Taxable income
Growth within retirement plan/account won’t be taxed until…
Withdrawn (tax deferral)
When withdrawn, all money will be…
Taxed and treated as income
Different features might apply to…
ROTH IRA
Retirement plans have annual limits to…
Contributions
What is the penalty if accessed prior to 59.5?
10% tax penalty
Exceptions from tax penalty include…
Disability, death, education, or first home
Withdrawals must begin by…
April 1st of the year the person turns 73
What is the penalty if withdrawals don’t start?
Tax penalty of 50% of what should have been withdrawn
Employer retirement plans must be open to…
All full-time employees after a certain time
Employee contributions belong fully to…
Employee
Employer contributions belong to employee after…
A few years
Employer plans that violate these rules are…
Non-qualified and won’t have favorable tax status
Defined Benefit Plan
Members will know what they get at retirement
Defined Contribution Plan
Members know how much will be put in but now how the account will perform
401k’s are setup and administered by…
Large employers
401k’s often include…
Employer matching of employee contributions up to a point
403b is also known as…
Tax-Sheltered Annuity Plan
403b are like 401k but for…
Non-profits; common at schools and hospitals
Keogh Plan was originally for…
Self-employed
Keogh plans are funded largely by…
Self-employed person’s business, rather than the individual
Keogh plans are also known as…
HR-10 Plan
Other employees must be eligible to participate in Keogh plans if…
They’re 21, work at least 1000 hours and have been there for a year
Traditional IRA’s were originally for…
Employees who did not have retirement plans at work
Traditional IRA’s can now be created for…
Nearly everyone with earned income
Unlike a 401k, traditional IRA’s are generally under investment control of…
The individual
Employees who also have a qualified plan at work can have an IRA but…
Might have a limit on deductible contributions
ROTH IRA’s are funded with money that’s…
Already been taxed
ROTH IRA’s have no taxes on withdrawals if done…
After 59.5 and account is at least 5 years old
ROTH IRA’s have no required withdrawals at…
73
SIMPLE Plans
Low-cost plans for businesses with less than 100 employees
SIMPLE plans include…
Matching and immediate vesting
Transfer
Moving money from one plan to the same type of plan
Transfers are generally not taxed because…
Money isn’t distributed to the taxpayer
Rollover
Moving money from different types of plans
Rollovers involve receipt of money by taxpayer and must be deposited into another qualified account within…
60 days to avoid taxes
