RET PLANS: RET PLANS
What is the penalty imposed for excess contributions to an IRA? A. 6% of the excess contribution B. 8 1/2% of the excess contribution C. 10% of the excess contribution D. no penalties are imposed
A. 6% of the excess contribution
When comparing Roth IRAs to Traditional IRAs, which statements are TRUE? I Traditional IRA contributions can be deductible; Roth IRA contributions are never deductible II Traditional IRA contributions are never deductible; Roth IRA contributions can be deductible III After age 59 1/2, distributions from Traditional IRAs can be taxable; distributions from Roth IRAs are never taxable IV After age 59 1/2, distributions from Traditional IRAs are never taxable; distributions from Roth IRAs can be taxable A. I and III B. I and IV C. II and III D. II and IV
A. I and III
In 2019, a doctor has earned $300,000 from her practice and another $200,000 from investments. Their maximum contribution to an HR 10 plan is: A. $46,000 B. $56,000 C. $66,000 D. $112,000
B. $56,000
For an investor who has a Keogh Plan, which of the following statements are TRUE? I The plan is a tax qualified II The plan is non-tax qualified III Once distributions commence at age 59 1/2 or later, only the tax deferred build-up is taxed IV Once distributions commence at age 59 1/2 or later, both the original investment and the build-up are taxed A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
Retirement plans that must comply with ERISA requirements include all of the following EXCEPT: A. Defined benefit plans B. Profit sharing plans C. Federal Government plans D. Payroll deduction savings plans
C. Federal Government plans
A self-employed individual makes $95,000 per year. To which type of retirement plan can the maximum contribution be made? A. Roth IRA B. Traditional IRA C. SEP IRA D. SIMPLE IRA
C. SEP IRA
ERISA requirements regarding the investments that are suitable for a retirement account stress: A. income potential B. capital gain potential C. safety of principal D. legal list securities
C. safety of principal
In 2019, individuals with earned income who are age 50 or over are permitted to make an extra annual IRA contribution of: A. $1,000 B. $2,000 C. $3,000 D. $4,000
A. $1,000
In 2019, the maximum contribution that an individual who earns $1,000 can make to an IRA is: A. $1,000 B. $4,000 C. $5,000 D. $6,000
A. $1,000
In 2019, a self-employed person earning $100,000, who also has $100,000 of investment income, wishes to open a Keogh Plan. Their maximum permitted contribution is: A. $20,000 B. $40,000 C. $56,000 D. $66,000
A. $20,000 Keogh (HR10) contributions are based only on personal service income - not investment income. $100,000 of personal service income x 20% effective contribution rate = $20,000. Note that this is less than the maximum contribution allowed of $56,000 in 2019.
Distributions from Section 401(k) plans are: A. 100% taxable B. partial tax free return of capital and partial taxable income C. 100% tax free D. 100% tax deferred
A. 100% taxable
Payments received by the owner of a tax qualified variable annuity are: A. 100% taxable as investment income B. only taxable to the extent of earnings above the holder's cost basis C. only taxable to the extent of the holder's cost basis D. non-taxable
A. 100% taxable as investment income
Which of the following statements are TRUE regarding a defined benefit plan? I The smallest contributions are for those individuals who are far away from retirement II The smallest contributions are for those individuals who are nearing retirement III The largest benefits will be paid to high salaried employees nearing retirement IV The largest benefits will be paid to low salaried employees the furthest away from retirement A. I and III B. I and IV C. II and III D. II and IV
A. I and III
In the year 2019, a divorced woman under age 50 collects $50,000 of alimony and child support as her sole source of income. The woman wishes to make a contribution to an Individual Retirement Account this year. Which statement is TRUE? A. No contribution can be made because the woman does not have earned income B. A contribution of up to $6,000 is permitted, but the contribution is not tax deductible. C. A tax deductible contribution of up to $6,000 is permitted D. A tax deductible contribution of up to $12,000 is permitted
A. No contribution can be made because the woman does not have earned income
If an individual, aged 69, takes a withdrawal from his Keogh Plan, which statement is TRUE? A. The amount withdrawn is subject to regular income tax only B. The amount withdrawn is subject to a 10% penalty tax only C. The amount withdrawn is subject to regular income tax plus a 10% penalty tax D. The amount withdrawn is not subject to any tax
A. The amount withdrawn is subject to regular income tax only
Which statement is FALSE about a SIMPLE IRA? A. The maximum annual contribution is the same as for a Traditional IRA B. The contribution is made by the employee, who gets a salary reduction for the amount contributed C. The plan is only available to small employers D. The employer must make a matching contribution
A. The maximum annual contribution is the same as for a Traditional IRA
A new customer, age 45, has been terminated from his assembly-line job of the past 20 years at an automotive parts supplier. During that time period, he has accumulated $124,000 in the company's 401(k) plan. He wishes to rollover the funds to an IRA account with your brokerage firm. This customer, who is an unsophisticated investor, has the entire 401(k) invested in a growth mutual fund and has no other investments. As the representative for this customer, your IMMEDIATE concern should be: A. communicating effectively with an unsophisticated customer in an understandable manner to assess financial goals and risk tolerance B. setting the investment allocation strategy that should be employed in order to provide sufficient retirement income for this individual C. creating a financial plan that emphasizes asset preservation and that is likely to provide a prolonged income stream for a prolonged period of retirement D. minimizing the tax consequences of any recommended transactions to increase the long-term growth potential of investments made
A. communicating effectively with an unsophisticated customer in an understandable manner to assess financial goals and risk tolerance
Your customer, age 68, that has an IRA account at your firm valued at $500,000, passes away. The customer leaves the account to his daughter, age 28. The daughter is permitted to do all of the following with the inherited IRA EXCEPT: A. roll the funds over into a new IRA in the daughter's name B. transfer the IRA funds to a beneficiary distribution account C. cash out the inherited IRA account D. disclaim or give away the inherited IRA account
A. roll the funds over into a new IRA in the daughter's name
A person can start withdrawing from his or her Individual Retirement Account without penalty at age: A. 50 1/2 B. 59 1/2 C. 60 1/2 D. 70 1/2
B. 59 1/2
A company has decided to terminate its retirement plan. In order to defer taxation on the distribution, the employee must roll over the funds into an Individual Retirement Account within how many days of the distribution? A. 30 B. 60 C. 90 D. 120
B. 60
Which statement is TRUE about 401(k) plans? A. They are established by the corporate employee B. Contributions are made with pre-tax dollars by the employee C. The maximum contribution amount is lower than that permitted for an IRA D. Distributions at retirement age are tax-free
B. Contributions are made with pre-tax dollars by the employee
Which of the following are characteristics of Defined Contribution Plans? I Annual contribution amounts are fixed II If the corporation has an unprofitable year, the contribution may be omitted III The annual benefit varies dependent on the number of years that the employee is included IV This type of plan is not subject to ERISA requirements A. I and II only B. I and III only C. II, III, and IV D. I, II, III, IV
B. I and III only
A couple, earning over $123,000 in year 2019, where both are covered by qualified retirement plans, wishes to contribute to an IRA. The contributions are: I permitted II not permitted III tax deductible IV not tax deductible A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
Distributions prior to age 59 1/2 from qualified retirement plans that are not rolled over into an IRA or other qualified plan are subject to: I 10% penalty tax II 20% penalty tax III 10% withholding tax IV 20% withholding tax A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
If a corporation has an unfunded pension liability which of the following statements are TRUE? I The expected payments from the retirement plan are in excess of the expected future assets in the plan II The expected payments from the retirement plan are lower than the expected future assets in the plan III The plan is in default and must be liquidated by the trustee IV The trustee must ensure that future funding is adequate A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
If a person under the age of 59 1/2 becomes disabled and wishes to withdraw money from her IRA, which statements are TRUE? I The withdrawal is subject to income tax II The withdrawal is not subject to income tax III The withdrawal is subject to a 10% penalty tax IV The withdrawal is not subject to a 10% penalty tax A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
Which of the following are characteristics of Defined Contribution Plans? I Annual contribution amounts are fixed II Annual contribution amounts will vary III The benefit amount to be received is fixed IV The benefit amount to be received will vary A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
ERISA regulations cover: I public sector retirement plans II private sector retirement plans III federal government employee retirement plans A. I only B. II only C. III only D. I, II, III
B. II only
Under the provisions of ERISA (Employee Retirement Income Security Act), the use of index options is: A. prohibited because of the speculative nature of these instruments B. allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan C. allowed only if the plan trustee maintains physical possession of the underlying securities D. allowed without restriction as long as the investment manager acts in a prudent manner
B. allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan
Payments received by the owner of a non-tax qualified variable annuity are: A. 100% taxable as investment income B. only taxable to the extent of earnings above the holder's cost basis C. only taxable to the extent of the holder's cost basis D. non-taxable
B. only taxable to the extent of earnings above the holder's cost basis
Your customer, age 68, that has an IRA account at your firm valued at $500,000, passes away. The customer leaves the account to his wife, age 48, who does not work. She needs current income and wishes to know her best option to minimize taxes. You should advise the spouse to: A. roll the funds over into a new IRA in the spouse's name B. transfer the IRA funds to a beneficiary distribution account C. cash out the inherited IRA account D. disclaim or give away the inherited IRA account
B. transfer the IRA funds to a beneficiary distribution account
In 2019, a self-employed doctor contributes the maximum permitted amount to a Keogh plan. The doctor has a full time nurse earning $60,000 per year. The contribution to be made for the nurse is: A. $5,500 B. $12,000 C. $15,000 D. $17,500
C. $15,000 25% of "after Keogh earnings" is used to compute the percentage to be contributed for employees. $60,000 of income x 25% = $15,000 contribution.
In 2019, a customer earns $500,000 as a self-employed doctor. The maximum contribution to a Keogh plan is: A. $25,000 B. $50,000 C. $56,000 D. $112,000
C. $56,000
A husband and wife wish to open a spousal IRA. The wife works while the husband does not. What is the permitted maximum contribution to this spousal IRA for the year 2019? A. $6,000 for the wife; $0 for the husband B. $6,000 for the wife; $3,000 for the husband C. $6,000 for the wife; $6,000 for the husband D. $60,000 for the wife; $60,000 for the husband
C. $6,000 for the wife; $6,000 for the husband
Distributions from qualified retirement plans that are not rolled over into an IRA or other qualified plan are subject to: A. 6% withholding tax B. 10% withholding tax C. 20% withholding tax D. 25% withholding tax
C. 20% withholding tax
In 2019, a self-employed individual earns $180,000 for the year, and contributes the maximum amount to an HR10 plan. If this individual wished to make a contribution to a self-directed Individual Retirement Account for this year, which statement is TRUE? A. A contribution is prohibited because this person is already covered under a qualified retirement plan B. A maximum contribution of $6,000 is permitted, which is an adjustment to that year's taxable income C. A maximum contribution of $6,000 is permitted, but no adjustment is allowed to that year's taxable income for that amount D. A contribution is permitted only if the HR10 contribution is reduced by the same amount
C. A maximum contribution of $6,000 is permitted, but no adjustment is allowed to that year's taxable income for that amount
Which statement is FALSE about 401(k) plans? A. The plan is established by the corporate employer B. The corporate employer can make matching contributions into the plan based on the contribution made by the employee C. All corporate employees must participate in the plan D. All contributions into the plan are made with pre-tax dollars
C. All corporate employees must participate in the plan
Contributions to Individual Retirement Accounts must be made by: A. December 31st of the calendar year in which the contribution may be claimed on that person's tax return B. December 31st of the calendar year after which the contribution may be claimed on that person's tax return C. April 15th tax filing date of the calendar year after which the contribution may be claimed on that person's tax return D. August 15th tax filing date permitted under an automatic extension of the calendar year after which the contribution may be claimed on that person's tax return
C. April 15th tax filing date of the calendar year after which the contribution may be claimed on that person's tax return
An individual who maintains a Keogh Plan is approaching the age of 70 1/2. Which statement is TRUE? A. Distributions from the plan must commence on the date that the individual reaches the age of 70 1/2 B. Distributions from the plan must commence on April 1st prior to the year the individual reaches the age of 70 1/2 C. Distributions from the plan must commence on April 1st following the year the individual reaches the age of 70 1/2 D. Distributions are not required, but may be taken at the discretion of the individual
C. Distributions from the plan must commence on April 1st following the year the individual reaches the age of 70 1/2
Which of the following statements about 403(b) Plans are TRUE? I Contributions are tax deductible to the employee II Employees of any organization can contribute to this type of plan III Employees make voluntary contributions through their employers IV Earnings on contributions by employees are tax deferred A. I and II only B. III and IV only C. I, III and IV D. I, II, III, IV
C. I, III and IV
Which of the following statements are TRUE regarding tax sheltered annuities for employees of non-profit organizations? I These are known as 401(k) plans II These are known as 403(b) plans III Monies contributed to this plan are excluded from taxable income IV Monies contributed to this plan are included in taxable income A. I and III B. I and IV C. II and III D. II and IV
C. II and III
Which statements are TRUE when comparing a Roth IRA to a Traditional IRA? I Anyone with earned income can open a Roth IRA II Anyone with earned income can open a Traditional IRA III Roth IRAs are not available to high-earning individuals IV Traditional IRAs are not available to high-earning individuals A. I and III B. I and IV C. II and III D. II and IV
C. II and III
Which statement is TRUE about the use of index option strategies by managers of pension plans subject to ERISA requirements? A. Index option trades are permitted without restriction B. Index option trades are permitted only if the options are broad based and exchange traded C. Index option trades are permitted only if such transactions conform with the objectives stated in the plan document D. Index option trades are prohibited under ERISA legislation
C. Index option trades are permitted only if such transactions conform with the objectives stated in the plan document
Which statement is TRUE regarding a 28-year old woman who inherits her grandfather's IRA? A. She may delay distributions until she reaches age 59 1/2 B. She may roll over the amount inherited into her own IRA C. She may receive distributions over her expected life D. She must start taking distributions upon reaching age 59 1/2
C. She may receive distributions over her expected life
If an individual, aged 44, takes a withdrawal from his Individual Retirement Account, which statement is TRUE? A. The amount withdrawn is subject to income tax only B. The amount withdrawn is subject to a 10% penalty tax only C. The amount withdrawn is subject to income tax plus a 10% penalty tax D. The amount withdrawn is not subject to any tax
C. The amount withdrawn is subject to income tax plus a 10% penalty tax
A person, aged 45, has a 401K plan at an employer and leaves his job at the firm. The 20% withholding tax requirement upon distribution will be imposed for which of the following situations? A. The entire distribution is rolled over into an Individual Retirement Account B. The entire distribution is transferred directly to the new employer's qualified retirement plan C. The entire distribution is taken as a check by the employee D. The entire distribution amount is retained inactive in the 401K plan
C. The entire distribution is taken as a check by the employee
In 2019, an individual earning $60,000 makes a contribution of $2,000 to a Traditional IRA. Which statement is TRUE? A. This person is prohibited from contributing to a Roth IRA in that year B. This person can contribute a maximum of $3,000 to a Roth IRA C. This person can contribute a maximum of $4,000 to a Roth IRA D. This person can contribute a maximum of $6,000 to a Roth IRA
C. This person can contribute a maximum of $4,000 to a Roth IRA
All of the following are true statements about Individual Retirement Accounts EXCEPT: A. the earliest a taxpayer may make an annual contribution is January 1st of that tax year B. the latest a taxpayer may make an annual contribution is April 15th of the following tax year C. if the taxpayer obtained a 4 month filing extension, he can make the annual contribution up to the extension date D. annual contributions may be made even if the person is covered by another qualified retirement plan
C. if the taxpayer obtained a 4 month filing extension, he can make the annual contribution up to the extension date
A 45-year old man earns $150,000 per year and is covered by his employer's 401(k) Plan. He quits his job and moves to a new company that has no retirement plan, but will also pay him $150,000 per year. He should be advised to: A. continue to make maximum annual contributions to his 401(k) Plan B. roll his 401(k) Plan into a Roth IRA and continue to make annual contributions to the Roth IRA C. roll his 401(k) Plan into a Traditional IRA and continue to make annual contributions to the Traditional IRA D. request a distribution of the 401(k) and use the proceeds to buy a variable annuity
C. roll his 401(k) Plan into a Traditional IRA and continue to make annual contributions to the Traditional IRA
If a corporation has an unfunded pension liability, this means that: A. inflation has eroded the value of the portfolio funding the plan B. the plan is in default because the existing retirees' benefit claims are not being met C. the expected future value of fund assets is less than projected benefit claims D. the expected future value of fund assets is more than projected benefit claims
C. the expected future value of fund assets is less than projected benefit claims
In 2019, a customer earns $500,000 as a self-employed doctor, and contributes the maximum permitted amount to a Keogh plan. The doctor has a full time nurse earning $25,000 per year. The contribution to be made for the nurse is: A. $0 B. $2,500 C. $5,000 D. $6,250
D. $6,250 , $25,000 of income x 25% = $6,250 contribution.
Tax deferred annuities for employees of non-profit organizations are known as: A. SEP IRA Plans B. Defined Benefit Plans C. 401(k) Plans D. 403(b) Plans
D. 403(b) Plans
The penalty tax applied for not taking required minimum distribution from a qualified retirement plan in a given year is: A. 6% of the shortfall B. 10% of the shortfall C. 15% of the shortfall D. 50% of the shortfall
D. 50% of the shortfall
All of the following are allowed investments into an Individual Retirement Account EXCEPT: A. Preferred Stock B. U.S. Government Bonds C. U.S. Government Gold Coins D. Antiques, Art, and Other Collectibles
D. Antiques, Art, and Other Collectibles
Distributions from an Individual Retirement Account must commence by: A. April 1st of the year preceding that person reaching age 59 1/2 B. April 1st of the year following that person reaching age 59 1/2 C. April 1st of the year preceding that person reaching age 70 1/2 D. April 1st of the year following that person reaching age 70 1/2
D. April 1st of the year following that person reaching age 70 1/2
Contributions to Keogh Plans must be made by: A. December 31st of the calendar year in which the contribution may be claimed on that person's tax return B. December 31st of the calendar year after which the contribution may be claimed on that person's tax return C. April 15th tax filing date of the calendar year after which the contribution may be claimed on that person's tax return D. August 15th tax filing date permitted under an automatic extension of the calendar year after which the contribution may be claimed on that person's tax return
D. August 15th tax filing date permitted under an automatic extension of the calendar year after which the contribution may be claimed on that person's tax return
Which of the following individuals earning $100,000 of income per year can make a deductible contribution to an IRA? I Corporate employee covered by a pension plan II Corporate employee who is not covered by a pension plan III Self-employed individual who has established a Keogh plan IV Self-employed individual who has not established a Keogh plan A. I and II B. III and IV C. I and III D. II and IV
D. II and IV
Which statements are TRUE about Roth IRAs? I Contributions must cease at age 70 1/2 II Contributions can continue after age 70 1/2 III Distributions must start after age 70 1/2 IV Distributions are not required to start after age 70 1/2 A. I and III B. I and IV C. II and III D. II and IV
D. II and IV
403(b) Plans are permitted to invest in which of the following? I Common stocks II Mutual Funds III Fixed Annuities IV Variable Annuities A. I only B. I and II only C. III and IV only D. II, III, IV
D. II, III, IV
Contributions to qualified retirement plans, other than IRAs, must be made by: A. December 31st of the calendar year in which the contribution may be claimed on that person's tax return B. April 15th of the calendar year in which the contribution may be claimed on that person's tax return C. April 15th of the calendar year after which the contribution may be claimed on that person's tax return D. The date on which the tax return is filed with the Internal Revenue Service
D. The date on which the tax return is filed with the Internal Revenue Service
Which statement is TRUE about transfers of Individual Retirement Accounts? A. A maximum of 1 transfer is permitted each year B. A maximum of 2 transfers are permitted each year C. A maximum of 3 transfers are permitted each year D. There is no limit on transfers
D. There is no limit on transfers
A 50 1/2 year old self-employed individual has a balance of $200,000 in his HR 10 plan. This balance is composed of $140,000 of contributions and $60,000 of earnings. The individual decides to withdraw $100,000 from the plan. Which statement is TRUE? A. There will be no tax liability B. There will be regular tax liability, but no 10% penalty tax liability C. There will be a 10% penalty tax liability, but no regular tax liability D. There will be both regular tax liability and a 10% penalty tax liability
D. There will be both regular tax liability and a 10% penalty tax liability
Individual Retirement Account contributions can ONLY be made with: A. stocks B. bonds C. mutual funds D. cash
D. cash
All of the following statements are true about non-contributory defined benefit retirement plans EXCEPT: A. contribution amounts vary based upon the age of the person covered under the plan B. larger contributions are made for older plan participants nearing retirement than for younger ones C. once benefit payments start, the amount of the benefit is fixed D. contribution amounts remain fixed based regardless of age
D. contribution amounts remain fixed based regardless of age
All of the following statements are true about SEP IRAs EXCEPT: A. the plan is established by the employer B. the plan allows for flexible contribution amounts C. the amount that can be contributed is significantly greater than for a Traditional IRA D. the contributions made are not deductible
D. the contributions made are not deductible
A new customer, age 40, has been terminated by her current employer. This individual had an annual salary of $60,000 per year and has $180,000 in her 401(k) account at that employer. She has been informed that the funds cannot be maintained in the ex-employer's plan. This client is single with no children, has little investment experience, and has no other investments or retirement plans. The client asks about rolling over the funds into an IRA. As the registered representative for this client, the LEAST important consideration when discussing this with the customer is that: A. any investments made in the IRA are consistent with the customer's stated investment objectives and limited investment experience B. if the retirement assets were to decline in value, this individual might not have sufficient opportunity to replace the lost funds C. based on increasing life expectancies, this individual may have a need for prolonged, substantial, income D. the rollover of the assets in the 401(k) to an IRA will impact the customer's reported taxable income for that year
D. the rollover of the assets in the 401(k) to an IRA will impact the customer's reported taxable income for that year
For a qualified retirement plan contribution to be deductible from that year's tax return, the contribution must be made by no later than: A. April 15th of that year B. December 31st of that year C. April 15th of following year D. the tax filing date of the following year
D. the tax filing date of the following year