Chapter 8: Retirement Plans

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Annuity

Traditional individual retirement annuity (IRA) distributions must start by

April 1st of the year following the year the participant attains age 70 1/2

Premature IRA distributions are assessed a penalty tax of

10%

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?

If Tom's employment is terminated, 20% of the funds would be forfeited

Which plan is intended to be used by a sole proprietor and the employees of that business?

Keogh Plan

How are Roth IRA distributions normally taxed?

distributions (withdrawals) are received tax-free

An employer that offers a qualified retirement plan to its employees is eligible to

make tax-deductible contributions to the plan

At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in

income tax and 10% penalty assessed upon funds withdrawn from the Qualified Plan

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

mandatory income tax withholding on the transfer amount

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a

Profit-sharing plan