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37 Cards in this Set
- Front
- Back
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Contributions to an IRA may NOT be invested in what?
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Life insurance |
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what are some inadvisable investments, and why?
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Municipal bonds and municipal bond funds Because IRA earnings are tax-deferred or tax-exempt...no benefit in investing in tax-exempt securities |
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if a surviving spouse inherits an IRA...
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They may elect to become the owner
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if a non spouse inherits an IRA...
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They cannot elect to be owner |
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if a trust inherits an IRA...
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Beneficiaries of the trust are bene's of the IRA Maximum payout based on oldest bene's age |
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what is "stretching" an IRA?
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A strategy used to distribute IRA assets beyond the lifetime of the person who originally established it |
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excess contributions not removed from a traditional IRA are subject to what?
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6% excise tax |
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What type of compensation is qualifies for IRA contributions
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Earned income, alimony |
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individuals who are NOT ACTIVE in a retirement plan at work may deduct what?
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all of their contributions up to contribution limits
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what factor is considered for individuals who ARE ACTIVE in a retirement plan at work to deduct a contribution to an IRA
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it is dependant on your adjusted gross income
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when is a person considered to be and "active" participant
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if they are eligible to participate in an employer-sponsored retirement plan...even if they elect not to participate |
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individuals and their unemployed spouse can make NON-DEDUCTIBLE contributions if...
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they are active in a plan or outside AGI limitations
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what is the penalty for early distribution for
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10% tax unless of death, disability, medical expenses, first time home purchases, higher education costs and medical insurance premiums
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if you do not take your RMD, what is the penalty
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50% penalty tax on insufficient RMDs |
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how often can you do a tax-free roll over
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once every 12 months |
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when can contribution dollars be withdrawn from a Roth?
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any time, without penalties, because the contribution is pre-taxed |
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T/F contributions and earnings in a Roth IRA cannot be made tax-free
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F, since all contributions are pre-taxed, contributions and earnings can be withdrawn tax free |
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who does a Roth IRA benefit the most |
individuals who may be in a higher tax bracket at retirement |
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all contributions to Traditional and Roth IRAs are ___ and cannot __ the limits
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aggregate exceed |
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contributions to Roth IRAs __ __tax deductible, and contributions can __ after ___
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continue 70.5 |
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Qualified distributions must abide by the 5 year holding rule and meet what other requirement(s)
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IRA owner is 59.5 or Is a result of the death or disability or Used for first time home buyer or Used for educational expenses or Used for medical insurance premiums |
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non qualified distributions from a Roth may be subject to what
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10% penalty tax |
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Can a traditional IRA be rolled over to a Roth, if so, does anything else happen? |
yes, but it will be taxable as income to the owner |
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SEP is used by whom?
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Small business owners |
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what are the advantages of a SEP
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Tax-deductible nature of contributions |
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SEP contributions are __ and may __ from year to year
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vary |
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employees can make __ SEP contributions in accordance with __ IRA regulations and limitations
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traditional |
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employer makes contributions to eligible employees. employee is eligible to participate in SEP contributions if:
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They are 21 or older They have worked for the employer at least 3 of the preceding 5 years Received at least $550 in wages for the current year |
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what does SIMPLE stand for?
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Savings Incentive Match Plan for Employees |
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SIMPLE plan allows employers to make tax-deductible contributions, but also allows what else? |
employees can make elective salary deferrals of their pre-tax compensation |
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Employers can have a maximum of __ employees to be eligible to use a SIMPLE
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100 |
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in regards to SIMPLE contributions...the employer can make what two types of contributions
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Non-elective contributions |
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what are the terms of matching contributions
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based on the elective contributions of employees up to 3% of compensation |
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what are the terms of non-elective contributions
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straight 2% of compensation to each eligible employee |
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eligible employees of a SIMPLE must receive how much in compensation?
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$5000 during the last two calendar years, while expecting $5000 for the current year |
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how long must an employee participate in a SIMPLE's before it can be rolled over
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employee must participate for a minimum of two years |
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what are the penalties for early withdrawal
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the penalty is 10% but is increased to 25% if made within the first two years
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