Retirement Planning-Traditional And Roth Ira

Front 1

What are the rules for contributions to multiple retirement plans?

Back 1

Employer may establish both 401k and 403b plans. However, elective deferrals are limited by EE rather than plan. EE may aggregate all elective deferrals from all 401ks, SIMPLE IRAs, 403b and SARSEP. The one exception is Sec 457, participant may contribute a second $17.5K

Front 2

What are the thresholds for deductibility of a traditional IRA?

Back 2

If neither spouse is an active participant in an employer sponsored retirement plan, than contributions are deductible.
If one spouse is active, non participant spouse may deduct contribution as long as income is less than $188K
If both spouses are active, deductibility phased out atS=$59-69K, MFJ=$95-115K and MFS=$10K

Front 3

What are the prohibited transactions for both traditional and Roth IRAs?

Back 3

1) borrowing money from IRA; 2) selling property to the IRA; 3) Receiving unreasonable compensation for managing the IRA; 4) using the IRA as collateral; 5) buying property for personal use with IRA funds.

Front 4

What type of investments are not allowed for an IRA?

Back 4

collectibles, life insurance policies, and any note or obligation. Collectiblees include artwork, rugs, antiques, gems, alcohol

Front 5

What is a stretch IRA?

Back 5

An IRA that extends the tax deferral of earnings within the IRA beyond the lifetime of the person who originally established the IRA through the use of multigenerational beneficiary designations. It allows the IRA owner's beneficiaries to name their own beneficiary at the owners death with the longest permitted tax deferral period, before all the assets in the IRA must be distributed.

Front 6

What is an inherited IRA

Back 6

An inherited IRA is created when IRA owner dies and leaves funds to nonspouse beneficiary. No further contributions, may be made.

Front 7

What are the Section 72t exceptions to early distribution penalty?

Back 7

IM 2 HEADED
I=IRS, M=Medical
(2HHs) House first time; Health Insurance Premiums if unemployed
E=Education; Age; D=Death; E=Equal payments (must continue for greater 5 years or until the age of 59 1/2)
D=Disability

Front 8

When are Contributions to a Roth IRA phased out?

Back 8

Max MAGI
Limit S=$127K; MFS=$188K and MFS=$10K However contributions to a roth IRA may be made for years beyond 70 1/2

Front 9

What is the aggregation rule?

Back 9

All deductible and nondeductible traditional IRAs are aggregated together and treated as one IRA for the purpose of calculating the basis of a distribution. This is to prevent a tp from choosing to convert or distribute only the nontaxable portion of a traditional IRA

Front 10

What are the ordering rules for a Roth IRA

Back 10

An amount distributed from a roth ira is treated as being made according to
1)from regular after tax contributions; 2) from conversion contributions on FIFO basis; and 3) from earnings generated from the plan investments.

Front 11

Rollovers may be made into traditional IRAs from what sources?

Back 11

1) employer's qualified retirement plan; 2)a traditional IRA;, SIMPLE (after 2 year);, Roth 3) a (section 457) and 4) a section 403b

Front 12

How is the RMD, required minimum distribution, calculated?

Back 12

Divide the IRA account balance as of the close of business on 12/31 of the preceding year by the applicable distribution period or life expectancy. The distribution period is derived from the IRS Uniform Lifetime Table (Table III)

Front 13

What is a qualified (nontaxable) distribution from Roth IRA?

Back 13

It must be made after the five consecutive tax years beginning with the tax year for which a contribution was first made to any roth IRA; AND owner is >59 1/2

Front 14

ERs making contributions to a SIMPLE IRA use one of two formulas(match up to 3% or 2% nonelective contribution. If the ER elects the 3% match. What is the maximum salary that the match is based on and when is the match vested.

Back 14

No more than $255K can be used for nonelective ER cobtribution. All contributions are immediately and fully vested. ER must notify notify participants 60 days b4 year end of deferrel election for next year.

Front 15

What was the changed made re 403b documents in 2009

Back 15

All must have a written document defining the role of each party involved and a sharing of information btwn fund providers and the plan sponsor

Front 16

How many SYs must the EE have in order to take advantage of the increased limit on salary reduction contributions for 403B

Back 16

15 years in an eligible organization (only HER Health Education Religion)

Front 17

Are distributions from a Section 457 plan subject to an early withdrawal penalty?

Back 17

No

Front 18

How are the threshold limits changed when one spouse is an active participant in an employer sponsored retirement plan but the other is not.

Back 18

The nonparticipant spouse may deduct contributions to his traditional IRA as long as their combined MAGI is less than $178K with full phase out at $188K

Front 19

What is a qualified distribution from a Roth IRA?

Back 19

After a 5 year holding period and owner is 59 1/2, dies, becomes disabled, or buying a home.

Front 20

What is a major difference btwn a Roth IRA and a traditional IRA?

Back 20

Roth IRAs permit only after tax, nondeductible contributions to be made. Also contributions may be made for years beyond age 70 1/2

Front 21

How are conversion of a traditional IRA to a Roth IRA treated?

Back 21

It is a qualified rollover if done within 60 days or as a trustee to trustee transfer. Distributions from a qualified plan can be covered directly to a Roth IRA .

Front 22

What distributions can NOT be rolled over to a traditional IRA?

Back 22

1)a required minimum distribution; 2)a hardship distribution; 3) annuity payments; 4)corrective distributions of excess contributions; 5) loans; 6)cost of life insurance coverage; 7) beneficiary distributions; and 8)ER securities dividends

Front 23

What is MAGI and how is it different for Roth IRAs?

Back 23

Modified AGI is defined as AGI w/o 1)IRA deduction, 2)student loans interest deduction; 3) tuition and fees deduction; 4) foreign earned income exclusion 5) foreign housing exclusion; 56)qualified savings bond interest exclusion and 7)the employer provided adoption benefits.

For Roth IRAs you must subtract any conversion income resulting from conversion of non Roth to Roth IRA

Front 24

Are retirees receiving pension annuity payments considered active participants

Back 24

No.

Front 25

What is recharacterizing a IRA contributions and what must be done in order to make a recharacterization effective?

Back 25

Recharacterization of IRA contributions is changing the IRAs to which contributionis being made. In order to be effective one must: 1)include transfer in net income and report recharacterization on tax return for the year the contribution was made; 2)treat the contribution as having been made to the second IRA on the date it was actually made to the first IRA

Front 26

When is the earliest that a spouse beneficiary of an IRA under the age of 59 1/2 begin taking minimum distributions

Back 26

Beginning year following death of spouse. Can take the distribution over the bene spouse's life. No penalty for being under 59 1/2

Front 27

If a nonspouse beneficiary xfers IRA to inherited IRA, when must the beneficiary begin taking minimum distributions

Back 27

beginning year following death. Distributions can be taken over beneficiary's life expectancy

Front 28

If the beneficiary is not the spouse, will the RMD amount change for the participant

Back 28

No only dual ages considered if bene if spouse.

Front 29

Can an IRA owner change the beneficiary without the consent of the spouse

Back 29

Yes as IRA are not considered qualified plans. Only qualified plans require consent of spouse.

Front 30

Sec72t generally applies to which type of plans

Back 30

Distributions taken from qualified plans, sec 403b plans, and IRAs before owner is 59 1/2

Front 31

What are two section 72t exceptions that DO NOT apply to IRAs but apply to all qualified plans and 403b

Back 31

W/D Penalty will not be apply to 1) distributions made after leaving job after age 55 and 2) QDRO

Front 32

What are two section 72t exceptions that ONLY apply to IRAs.

Back 32

2H of IM 2HEADED
W/D Penalty will not be apply to 1) distributions for higher education costs for tp spouse, child or grandhcild; 2)First time home buyer

Front 33

How are distributions from IRAs treated

Back 33

All deductible and nondeductible IRAs must be aggregated together and treated as one IRA for the purpose of calculating the basis of a distribution.. Any amount converted that is a return of basis is not included in income. No early w/d penalty on basis return

Front 34

What is the significance of the distribution ordering for a Roth IRA

Back 34

It is for non qualified distributions. The first layer will be a return of basis (contribution), followed by conversion contributions. Note that sec 72t penalty will not apply if IM 2HEADED

Front 35

What is the amount of contributions can be made to a traditional IRA or Roth IRA

Back 35

Contributions in aggregate for traditional IRA AND Roth IRA for 2013 is $5.5K plus $1K cath if over 50. Contributions must be from earned income. Earned income does not include (rental income, portfolio income or pension, annuity, deferred comp, foreign earned income, but does include alimony

Front 36

What is the excise tax for overcontributing to IRAs

Back 36

6%

Front 37

Who is required to take RMDs

Back 37

Participants in qualified plans, 403bs and all IRAs. First distribution must be made April 1 following the year tp is 70 1/2. If deferred until April 1, two distributions must be made in that year

Front 38

Who can defer the April 1 date

Back 38

NOT IRAs. Participants in qualfied plans and 403b if continued to work. Deferral option is only available for current ER.

Front 39

Are MLPs master limited partnership permitted investments in a SEP IRA

Back 39

Yes. MLPs are publicly traded.

Front 40

Which plans offer 10-year averaging

Back 40

Qualified plans, profit sharing. But not IRAs, 403b plans