2-15 Chapter 13

Herbert and Olga, both age 48, have been married for 10 years. They have no children, and each has a well-paying job. However, neither is covered by an employer retirement plan. What is the maximum amount they may set aside together in tax-deductible, traditional IRA funds in 2023? - $4,000 - $5,000 - $8,000 - $13,000

$13,000

Bob, age 43, owns a traditional IRA and a Roth IRA. What is the maximum amount that he can contribute to both accounts in 2023 without being penalized? - $2,000 - $4,000 - $5,500 - $6,500

$6500

If David sets up a traditional IRA, what is the maximum contribution he can make and deduct from taxes in 2023? - $1,000 - $3,000 - $4,000 - $6,500

$6500

All of the following types of plans are reserved for small employers EXCEPT - 401(k)s - SARSEPs - SIMPLE IRAs - SIMPLE 401(k)s

401(k)s

A distribution received from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within how many days after the distribution? - 20 - 30 - 45 - 60

60

Which of the following scenarios pertaining to IRAs is NOT correct? - June has accumulated $30,000 in her IRA. At age 53 she withdraws $2,500 to take a vacation. She will have to include the $2,500 in her taxable income for the year and pay a $250 penalty. - Bradly, age 72, is covered by an employer-sponsored retirement plan. He cannot establish a traditional IRA. - Peter inherits $15,000 in IRA benefits from his father, who died in 2008. Peter can set up a tax-favored rollover IRA with the money and defer current income tax on the benefits received. - Walter is age 60. He may take his distribution from his IRA without having to worry about an early withdrawal penalty.

Bradly, age 72, is covered by an employer-sponsored retirement plan. He cannot establish a traditional IRA.

Which of the following statements correctly describes the tax advantage of a qualified retirement plan? - Employer contributions are not taxed when they are paid out to the employee. - Earnings of the plan are taxable to the employee only when he or she receives benefits. - Earnings of the plan are only taxable if the employee voluntarily terminates participation in the plan. - Employer contributions are deductible business expenses when the employee receives the benefits.

Earnings of the plan are taxable to the employee only when he or she receives benefits.

All of the following employed persons who have no employer-sponsored retirement plan would be eligible to set up and contribute to a traditional IRA EXCEPT - Miriam, age 26, a student with no earned income - Brent, age 40, medical technician - Edna, age 72, nurse - Jack, age 60, plumber

Miriam, age 26, a student with no earned income

Which of the following phrases best describes vesting? - The time at which the worker meets the eligibility requirements for plan participation - The age at which an employee must begin to make withdrawals from retirement plans - The right of a worker's spouse to be considered in retirement income needs - The employee's right to funds or benefits, contributed by the employer, should he or she leave that employer

The employee's right to funds or benefits, contributed by the employer, should he or she leave that employer

Which of the following statements about 401(k) plans is CORRECT? - All of a company's employees must participate in the plan. - An employees deferred contributions become nonforfeitable according to the plan's vesting schedule. - Employer contributions are included in the employee's income for the year. - There is a limit on employee deferrals

There is a limit on employee deferrals

All of the following should be eligible to establish a Keogh retirement plan EXCEPT - a dentist in private practice - partners in a furniture store - a sole proprietor of a jewelry store - a major stockholder-employee in a family corporation

a major stockholder-employee in a family corporation

All of the following statements about SIMPLE plans are correct EXCEPT - an employer may establish a SIMPLE plan if another qualified plan is not already in place - they can be structured as an IRA or as a 401(k) cash or deferred arrangement - an employer must make a nonelective contribution of 2 percent of compensation on behalf of each eligible employee - only employers with no more than 100 employees can establish SIMPLE plans

an employer must make a nonelective contribution of 2 percent of compensation on behalf of each eligible employee

All of the following statements regarding Roth IRAs are true EXCEPT - they provide for tax-free accumulation of funds - they limit contribution each year - they mandate distributions no later than age 72 - they are not available to those in the upper-income tax brackets

they mandate distributions no later than age 72