Unit 4 Retirement Plans

Under which condition, there is no 10% penalty for early distribution before 50.5 in IRA

1. Death 2. Disabled 3. First home Purchaser

Roth 401(k)

=Roth IRA + 401(k) after-tax contribution, tax-free distribution. must have 5 years old account no income limit contains of 2 accounts: Roth 401(k) and regular 401(k), the employer match part is put into the regular 401(k)

Not "earned income"

Capital gain Interest and dividend income Pension and annuity income Child support Passive income from DPPs

One of your clients is discussing various options for funding his IRA. Current tax law would permit investing in which of the following vehicles? Collectible stamps issued by the U.S. Postal Service. Gold or silver coins minted by the U.S. Treasury Department . Fixed annuities. REITs.

In general, investments in collectibles are not permitted in IRAs. The one major exception is U.S. gold and silver coins minted by the Treasury Department. Although some might object to placing an annuity into a tax deferred plan because it is already tax deferred, there could be a good reason for it's inclusion and, more important for this question, it is permitted.

What is Keogh Plan/ HR-10 Plan?

It is for self-employed person/owner-employed person/professional practice eg: teacher use spare time to do something related to professional practice. consultant/business contractors/freelancers/corporation employee who has a part-time job as consultant

Will people allowed to make IRA contribution with an extension to Apr.15?

No, the extension does not give you more time to pay your taxes, it only extend the time that you have filed your return.

Non-qualified Plans

Payroll deduction plans Deferred Compensation Plans

What can not be used as investment in 529 plan?

U.S. Government Bonds

Inherited an IRA from someone (not spouse)

When an IRA is inherited, other than from a spouse, the only way to avoid a reportable distribution is to do a trustee-to-trustee transfer. Because Mrs. Beech received the distribution, the normal rollover rules do not apply.

When must an individual start to withdraw from traditional IRA without penalty?

Withdraw must begin by Apr.1 of the year following the year which the account owner reaches 70.5. eg: individual reaches 70.5 at Jan.1. 2010, then he/she must begin withdraw from Apr.1.2011

Early withdraw from 401k without penalty

kThe penalty for withdrawals from a 401(k) plan taken before age 59½ is waived only in the cases of death, disability, qualified domestic relations orders (QDROs), medical expenses, certain period payments, and corrections of excess contributions.