SIE- Retirement Accounts

Keogh (HR10 Plan)

self employed only. max is 25% of income. $57,000 in 2020. Adjusted for inflation Earnings build up tax deferred. same rules for distributions as IRAs. Difference: allow cash value of life insurance to be considered as an investment.

SEP IRA

simplified employee pension. Used by small bus. contributors can't exceed smaller 25%of income or $53000 employers make contributions on employee behalf. employer must contribute the same % for all employees. employees can still make their normal IRA contributions.

Contribution IRA limit

$5,500 is spread among both roth and traditional.

What best describes a 403(b) plan?

0 cost basis Contributions to a 403(b) plan are made by salary reduction, so these dollars were never taxed. Earnings build tax deferred when distributions commence at retirement age, they are 100% taxable at ordinary income tax rates

For the year 2020, the maximum annual contribution to an Individual Retirement Account for a single person is:

100% of income or $6,000, whichever is less

The maximum annual contribution to a Keogh plan is

20% of income (prior to taking the Keogh "deduction") or $57,000 in 2020, whichever is less.

Traditional IRA

5,500 contribution limit. Only contribute only in CASH. 10% penalty for withdrawals prior to 59 1/2. can contribute up to 70 yrs. old 50% penalty if you don't take the RMD in time. Available to anyone with earned income. Must contribute by April 15 following year. Investments include CDs, precious metals, coins and bullion. Gains are taxed deferred. Distributions are taxable.

ERISA legislate was enacted to:

protect employee retirement funds from employer mismanagement. Stresses investments should be safe.

IRA contribution notes

Anyone can contribute to an IRA, whether covered by a pension plan or not. If a couple is not covered by a qualified plan, the contribution is tax deductible and the maximum that can be contributed in 2020 is $6,000 each ($12,000 total). However, the contribution is not tax deductible for couples, where both are covered by qualified plans, who earn over $124,000 in year 2020 (the deduction phases out between $104,000 - $124,000 of income).

What is the first age at which distributions must commence from a 401(k) Plan?

April 1st of the year after reaching age 72

Contributions to Keogh Plans must be made by:

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

Tax deferred

Build up on account. taxes are paid upon withdrawing the funds. No taxes during.

Roth IRA

High earners cannot use. Non tax qualified. no cap on age you can contribute. 10% penalty on early withdraws. No RMD(required minimus distribution) requirement. Distributions are tax free if been open for 5 yrs and older than 59 1/2. Must contribute by April 15 following year. Gains are taxed deferred. If moneys are kept for 5 years, distributions are NOT taxables. Can contribute after 70 1/2

An individual who maintains a Keogh Plan is approaching the age of 72. Which statement is TRUE?

Distributions from the plan must commence on April 1st following the year the individual reaches the age of 72

Keogh plan for employees

If an employer earns $285,000 or more and contributes the maximum of $57,000 to a Keogh in 2020, then 25% of "after Keogh earnings" is used to compute the percentage to be contributed for employees. If the employer earns $500,000 and contributes $57,000 to the Keogh, the "after Keogh earnings" are based on the "cap" income amount of $285,000. $285,000 - $57,000 = $228,000 of "after Keogh deduction" income. $57,000/$228,000 = 25%. Thus, for the nurse, $25,000 of income x 25% = $6,250 contribution.

Which statement is TRUE when comparing a Roth IRA to a Traditional IRA?

Roth IRAs are not available to high-earning individuals; Traditional IRAs are available to high-earning individuals

SIMPLE IRA contributions

SIMPLE IRAs are only available to small businesses with 100 or fewer employees. Each employee contributes up to $13,500 (in 2020) as a salary reduction. In addition, the employer must make a matching contribution of either 2% or 3% of the employee's salary (the 2% match option must be made regardless of whether the employee makes any contribution; the 3% match must be made only if the employee makes a contribution). Also note that there is no flexibility regarding the employer match - it must be made in good times and bad times by the company.

Tax qualified

Tax deductible contributions can be made. Money contributed is deducted from income that year. Everything coming out is taxable.

ERISA plan Vesting

employees earn the benefit. once it is fully vested, it is property of the employee. Benefits vest over 5 years at 20% per year of service.

for non-profit employees

employees of non-profit are permitted to make salary reduction retirement plan contributions to a tax sheltered annuity.

IRA Rollover

Transferring $ from one IRA to another. Amount is unlimited. Only done once a year. Rollover must occur within 60 days only from trustee to trustee. If check is written out to customer, subject to 20% withholding tax.

Defined benefit plan

a tax-qualified pension plan in which the employer promises to provide each covered person with a pre-set benefit amount upon retirement. The employer must contribute to this plan regardless of the profitability of the company.

Distributions from Roth IRAs:

can commence at any time after reaching age 59 1/2 without being penalized

Non-tax qualified plans

distributions are partially tax-free, with the amount above the original cost basis being taxed.

SIMPLE IRA

less costly contribution amounts are deductible max contributions for 2015 is 12,500

Non-tax qualifiedly

non deductible contributions are made. the money contributed can't be deducted. Only growth is taxed as money comes out.

In an Individual Retirement Account or Keogh Plan, a 10% penalty tax will be imposed for:

premature distributions from an Individual Retirement Account or Keogh Plan