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Consequences for withdrawing before 59.5?
10% and taxed at ordinary income level unless an exception
Penalty for not taking an RMD?
50%
Age distributions may begin at
59.5
Annuity is between who?
A contract between you (the annuitant) and the insurance company
To sell a variable product you need what license?
Both securities AND insurance license
403(b)s taxation is?
Contributions: Pre-tax E and G: Tax deffered Distributions: Ordinary income taxed
529 federal limitation on gifts
Gift can only be 15,000
Life annuity with 5 year period certain
Gurantees five years but will stay pay until you die
Which of the following is not a characteristic of the accumulation period of a variable annuity?
Investor must pay income tax on investment growth Explanation: During the accumulation period of a variable annuity, investors are making payments to the insurance company and are purchasing "accumulation units". There are no tax consequences to the investor during this period of time. A tax liability will exist once the annuitization period is reached.
What happens if the beneficiary doesnt use the 529?
May be transfered to a family member OR distrubute to yourself, subject to 10% penalty plus ordinary income
An annutiant may pay a surrender charge:
When selling an annuity
Life Annuity
an annuity that matures when you die
At age 57, Daniel started a Roth IRA. He is now age 60 and takes a $20,000 distribution for retirement income. What is the tax consequence of his distribution?
The earnings portion is taxable but there is no 10% penalty Explanation: This is not a qualified distribution, because it doesn't meet the five-year test. But it is made after age 59 ½, so there is no 10% penalty. The earnings portion is subject to ordinary income tax.
Age distributions must begin
72
Surrender charge
A few to withdraw capital prior to annuitization. will decline annually until it hits 0
Distributions from a Section 529 plan
Are tax-free at time of receipt
Variable annuinites hav what risks?
Credit risk and market risk
Who cannot contribute to Roth IRAs
High income earners
If you are unhappy with your current IRA provider what should you do?
Rollover = custodian to custodian Rollover must be completed within 60!!! days
Post tax is also called
non-qualified
ABLE account has what limit
15000
Accumulation in
= money in Investors piurchase acumulation UNITS The number and value of units with VARY
Annutization out
= money out accumulation units convert into a FIXED number of annuity units The value will fluctuate
Fixed annuities have what risks
Credit risk and purschasing power risk
Earnings in the Roth IRA are taxed how?
Tax free
Which types of accounts are tax defferal?
401k, pension, traditional IRA, qualified annutiies Pay taxes later
Annual limit for coverdell acount
2000
ABLE account for disabilites before what age
26
Employees of public schools, public hospitals, non corp organizations are offered what type of retirement plan?
403(b)
1035 exchanges enables investors to
A tax free transfer of one annuity for another Ex. you are dissatisified with this particular annuity, shows IRS you are just changing retirment accounts, no distrubituons made
Which of the following factors is least important when making a suitability determination for a variable annuity purchase?
Credit rating of the insurance company Explanation: The credit rating of the insurance carrier would be the least important of these items when making a suitability determination for a variable annuity purchas
During the accumulation phase of a variable annuity, dividends, interest, and capital gains
May be reinvested without any current tax liability Explanation: One of the most attractive benefits of a variable annuity is tax-deferred growth during the accumulation period. All dividends, interest, and capital gains earned during the accumulation period may be reinvested tax free.
An investor has sold a Jul 80 put when the underlying stock is trading at 79.25. If this option contract is exercised, the writer
Must purchase the underlying shares Explanation: When a put option is exercised, the writer of the put must purchase the underlying shares at the exercise price. In this case, the writer must purchase 100 shares of the stock at the $80 strike price.
fixed contracts annutiies
NOT securities Return is guranteed at a fixed rate by the insurance company. Credit risk and purchasing power risk Fixed annuity premiums are invested into the insurance company's: General Account
Does 1035 avoid surrender charges?
No
Coverdell Education Savings Account
Opened for any student under the age of 18 Assets MUST be withdrawn/transferred by age 30
Defined Benefit
Promises specific retirment beenfits Based on: Years of service average salary position/life Plan sponsor determines required contributions Employer selects investemnts and bears risk Ex. Pension plan
Pre taxed is also called
Qualified
By which date must the holder of a Traditional IRA begin taking Required Minimum Distributions?
Required Beginning Date Explanation: The Required Beginning Date is April 1 of the year following the year in which a Traditional IRA owner turns age 72.
Defined Contribution
Retirement benefits vary on: amount invested and performance of investments selected Contributions are decided by each participant Plan participant selects investments and bears risk. Ex. 401k
Which types of accounts are pre tax/tax free?
Roth IRA, ABLE, Coverdell, 529 Pay taxes now then when you withdraw is not taxed
Variable contract annuities
SECURITIES return VARIES with teh performance of investments that you choose You can choose across a variety of subaccounts Variable annuity premiums are invested into the Seperate account
Deferred variable annuity
Tax deffered earnings and growth Withdrawls at 59.5
Earnings in the traditional IRA are taxed how?
Taxed as ordinary income
Roth IRA RMD?
There is none bc its after tax so they dont care
Why would someone particpate in a non qualified corporate plan?
To offer to only executives or top performers, not availabe to everyone, to contribute larger amounts. Non-qualfieid plans have credit risk NOT protected
Which one of the following is not a type of employer-sponsored IRA plan?
Traditional IRA Explanation: A Traditional IRA is an individual retirement plan. SIMPLE IRAs and SEP-IRAs are employer-sponsored.
Can an investor contribute to both a traditional and Roth IRA in the same year?
Yes but total across the 2 is $6000 or $7000 if over 50
Excess contribtuions penalty to IRA
6%
Annual contribution. to IRA
6000 if over 50 catchup 7000
2 requiremnts for a Roth to be tax free
Age: 59.5 Years since 1st contribution: 5
Non-qualified corporate plans
Contributions go in after tax basis Earnings and growth are tax deffered Distributions : Earnings and growth are taxed as ordinary income
What kind of income must you contribure to an individual account?
Earned income
529 is for?
Education savings accounts Plan can be opened for any individual (no age limit) Contributions are post tax Annual limit: varies by states E+G: tax free distributions: tax free
A customer makes a contribution to his IRA brokerage account on March 12, 2012. For tax purposes, for which year will this contribution be made?
He may designate the contribution as being for either 2011 or 2012. Explanation: For any IRA contribution made between January 1 and April 15, the taxpayer must designate which year the contribution is for - the year past or the current year.
Period Certain Annuity
Annuity that guarantees payments to an ANNUITANT for a particular period of time. For example, a 10-year period-certain annuity will guarantee annuity payments for at least 10 years. If the annuitant dies before the 10 years have expired, the payments will continue to the beneficiaries for the remaining term.
The guarantees of fixed annuities are provided by
the issuing insurance company. Explanation: The insurance company, not the investor, bears the investment risk in a fixed annuity, meaning that no matter how the market is performing, the insurance company must always pay the investor the guaranteed fixed rate.
Qualified corporate retirment plans
let employees and their employers contribute into a retirement account. Pre tax (tax-deductble) Earnings and growth are taxed deffered Distributions are taxed as ordinary income
