retirement
A school teacher is retiring after 20 years of service. During the past 10 years, she invested $10,000 in a 403(b) through a payroll deduction offered by the school. Her account is now worth $16,000. What is her cost basis?
$0 The teacher has contributed to a qualified retirement plan; therefore, all the money she has invested is pre-tax. She has not paid taxes on any of the money yet, so her cost basis is $0, and she will be required to pay ordinary income taxes on the entire amount she withdraws
TSA penalties
10% before 59.5
Roth IRA penalties
10% penalty if withdraw before 59.5. Waived if for first home purchase.
401k penalties
10% withdrawal
TSA dist
100% taxed
If rollover from an employer plan -> own IRA, subject to
20% withold tax
ERISA eligibility
21+ , full time (1000 hours), 1 year or more of service
SEP eligibility
21, worked for them 3 of 5 years, and made a minimum amount
Roth IRA distribution ages
After 59.5. No late fee
529 plan contributions
After-tax, deductible, considered gifts
ROTH IRA cont
After-tax, up to set max
Benefit of SEP IRA vs normal IRA
Allow self employed people to contribute more than traditional IRA
IRA contributions must be in by _ for this year
April 15 of next year
IRA penalties
Before 59.5 - 10% penalty and income tax. After 70.5 - 50%
Health savings account
Before tax contributions that grow tax free in a savings account for medical expenses. For people with high deductibles.
IRA rollover
Can go IRA -> IRA or qualified plan -> IRA, have 60 day period to do so
401k rollover when switching jobs
Can transfer to 401k with new employer, or transfer to an IRA rollover account with no tax witholding
IRA must be paid in
Cash
Coverdell cont taxability
Contributions are after tax
IRA contribution taxes
Contributions are deductible
IRA distributions ages
Earliest is after age 59.5. Must begin by April 1st of year after turning 70.5
Coverdell also known as
Education IRA
What is Coverdell
Educations saving account for kids college
Which of the following statements correctly summarizes that tax advantages of qualified retirement plans?
Employer contributions are tax deferred to the employee. Employer contributions are taxed to the employee at the employee's tax rate at time of withdrawal. Employer contributions are tax deductible. All of the above are correct. All of these statements correctly state tax advantages available through qualified retirement plans.
Keogh contributions
Employer up to max of 20% or $53,000. Stops at 70.5.
A man is 52 years old. He is terminating his employment at a state university. He is fully vested in a 457(b) plan. If he withdraws the money from his 457 (b) plan,
He must pay income tax. He must pay income tax. There is no 10% penalty on early withdrawal from a 457(b) plan.
HSA
Health savings account
Hr-10 plan aka
Keogh Plans
Keogh contributions tax
Made after-tax
IRA Contributions
Max 5k pear year if under 50. Catch up allowed over 50. ONLY CASH
Coverdell contributions
Max of $2,000 per student per year until age 18
Upon termination of employment, an employee's funds from a 457(b) plan
May be transferred into an IRA. Once transferred, the funds become subject to a 10% penalty for early withdrawal. Funds from a 457(b) plan may be transferred to an IRA or other qualified plan; however once transferred the funds lose the exemption from the 10% penalty for early withdrawal.
Coverdell expiration
Must be used by age 30. If not, subject to penalty and income tax unless rollover to edu IRA for another kid
Does ERISA allow buying options
No
457(b) is a _ program
Nonqualified, salary deferral
How are funds contributed to a 403(b) treated for taxation?
Not included as income for the employee, but are taxable as income upon distribution
IRA distribution before 59.5
Regular income tax + 10% early penalty
A 50-year-old individual needs $20,000 for his child's education, and wishes to withdraw the necessary funds from his IRA. Which of the following statements is true concerning taxation on the withdrawal?
Regular income tax on withdrawals in excess of his basis will apply, but no penalty tax. Withdrawals from an IRA are subject to regular taxation. In addition, a 10% premature withdrawal penalty is assessed on anyone withdrawing the money under age 59½. However, the penalty will be waived if the distribution is due to the owner's death or disability, for medical or education expenses and first-time home ownership.
TSA
Saving programs for school employees, religious orgs, and tax exempt orgs
SIMPLEs
Savings Incentive MAtch Plans for Employees
SEP plans available to which of following a. self employed people and their employees b. employees of a corp where a 401k is available c. employees of a nonprofit d. employees covered by a union
Self employed
Keogh plans are for
Self employed and their employees
Your client earns $21,000 and has been contributing $2,000 to an individual IRA account annually for the past 3 years. This year her employer initiated a pension plan, which also covers her. What can be done about her IRA account?
She can keep the IRA account and make pre-tax contributions up to $5,500 each year. Individuals covered by a corporate pension plan can make fully deductible IRA contributions of up to $5,500 annually. A single taxpayer making less than $59,000 or joint making less than $95,000 can continue tax-deductible IRA deductions.
SEP IRA
Simplified Employee Pension plans
An employer wants to begin a pension plan for its employees but does not want the obligation of annual contributions because of wide cash flow swings due to growth and plans for expansion. Which plan allows flexibility and still provides immediate vesting on contributions?
Simplified employee pension plan The simplified employee pension plan (SEP) allows flexibility of contributions and still provides immediate vesting.
Roth IRA funds grow
Tax deferred
401k dist
Tax free after 5 years and 59.5
Roth IRA dis
Tax free if account held for 5 years and over 59.5
403-b
Tax sheltered annuities
457(b) penalty
There is no penalty for early withdrawals, it is exempt.
How long does money stay in 457(b)
Until reitrement (70.5 max) or employee terminates employment
529 plan
Used for college savings
Roth 401k cont
after-tax. matched by employer, but their cont goes to a traditional ira.
who can make fully deductible IRA contributions
any eligible person not participating in a qualified retirement plan, or people not covered by an employer-sponsored plan
TSA cont
before tax
Simplified Employee Pension plans apply to
easy way for self employed or small business owners to set up employee pension plans
SMILE cont
employee makes pre-tax, employer matches
457(b) is for
employees of public institutions, liek state/local gov and private nongov tax exempt orgs
SEP contributions
employer contributes up to max percent to employee account, gets a deduction. Employee doesn't contribute anything. employer can contribute when they want
401k penaltiy exemption
hardships or loans
457(b) penalty exemption - lost if
if funds are transferred to a qualified plan, like 401k 403b, or IRA
roth 401k diff from roth ira
must withdraw by 70.5 and no income limitations
Does ERISA allow selling uncoveered short options
no
457(b) contributions taxation
not taxed because they never received the income, its deferred
IRA early penalty exemptions
penalty will be waived if the distribution is due to the owner's death or disability, for medical or education expenses and first-time home ownership. Still income tax though
457(b) contributions
pre-tax contributions go straight into it
Savings Incentive MAtch Plans for Employees
reitrement plans for business with less than 100 employees and no other plan in place
Keogh contributions time period
stop at 70.5
IRA distributions
subject to regular income tax
529 plan distribution
tax-free at federal level if used for school. tax-free at state level if in state school
Coverdell distribution
tax-free if used for school
457(b) termination of employment
transfer funds into new employer's plan, or into an IRA
how much can people not covered by an employer-sponsored plan deduct when contributiong to an IRA
whole amount
Eligbility for employee (keogh)
work 1,000 hours per year. over 21. been working there for at least a year
Does ERISA allow covered call writing
yes
401k
you donate a % of salary (pre-tax) and employer matches
