Chapter 9 Retirement Plans

Premature IRA distributions are assessed a penalty tax of:

0% 10% 15% 20% *10%

All of the following statements about traditional indivdidual retirement accounts are false EXCEPT

10% penalty is applied to withdrawals after age 59 1/2 Withdraws are normally tax-free to the recipient 10% penalty is applied to withdrawals before age 59 1/2 Contributions are not tax deductible *10% penalty is applied to withdrawals before age 59 1/2

How are Roth IRA distributions normally taxed?

10% penalty tax is applied Taxed as ordinary income Capital gains tax is applied Distributions are received tax-free *Distributions are received tax-free

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

20% of the funds are subject to taxes 80% of the funds are invested is a seprate account If Tom's employment is terminated, 20% of the funds would be forfeited If Tom's employment is terminated, 80% of the funds would be forfetied *If Tom's employment is terminated, 20% of the funds would be forfeited

Post-tax dollar contributions are found in:

401K investments Traditional IRA investments SIMPLE investments Roth IRA investments *Roth IRA investments

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

70 1/2 65 55 59 1/2 *59 1/2

Which of the following is TRUE about a qualified retirement that is "top heavy"?

More than 30% of plan assets are in key employee accounts More than 40% of annual additions are for key employee accounts More than 50% of plan assets are in key employee acccounts More than 60% of plan assets are in key employee accounts *More than 60% of plan assets are in key employee accounts

A sole proprietor may use this plan ONLY if the employees of this business are included.

SEP Plan Keogh Pension Plan Individual Retirement Account (IRA) SIMPLE Plan *Keogh Pension Plan

Traditonally individual retirement annuity (IRA) distributions must start by:

age 59 1/2 age 65 April 1st of the year following the year the participant attains age 59 1/2 April 1st of the year following the year the participant attains age 70 1/2 *April 1st of the year following the year the participant attains age 70 1/2

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

rollover plan 403(b) plan profit-sharing plan salary reductio plan *Profit-sharing plan