Exam 13: Retirement Savings and Deferred Compensation

Kathy is 60 years of age and self-employed.During 2019 she reported $500,000 of revenues and $100,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to a simplified employee pension (SEP)IRA for 2019? Assume she pays $27,192 in self-employment for 2019.(Round your final answer to the nearest whole number.)

Which of the following statements regarding traditional IRAs is true?

Daniela retired at the age of 65.The current balance in her Roth IRA is $200,000.Daniela established the Roth IRA 10 years ago.Through a rollover and annual contributions Daniela has contributed $80,000 to her account.If Daniela receives a $50,000 distribution from the Roth IRA,what amount of the distribution is taxable?

Kathy is 60 years of age and self-employed.During 2019 she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to a simplified employee pension (SEP)IRA for 2019? (Round your final answer to the nearest whole number.)

Which of the following statements regarding self-employed retirement accounts is true?

Dean has earned $70,000 annually for the past four and a half years working as an architect for MWC.Under MWC's defined benefit plan (which uses a five-year cliff vesting schedule)employees earn a benefit equal to 3.5 percent of the average of their three highest annual salaries for every full year of service with MWC.What is Dean's vested benefit (or annual benefit he has earned so far)?

Tatia,age 38,has made deductible contributions to her traditional IRA over the past few years.When her account balance was $30,000,she received a distribution of the entire $30,000 balance of her traditional IRA.She retained $5,000 of the distribution to help her pay the taxes due from the distribution and she immediately contributed the remaining $25,000 to a Roth IRA.What amount of tax and early distribution penalty is she required to pay on the $30,000 distribution from the traditional IRA if her marginal tax rate is 25 percent?

Kathy is 48 years of age and self-employed.During 2019 she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to a simplified employee pension (SEP)IRA for 2019? (Round your final answer to the nearest whole number.)

Which of the following is true concerning employer funding of nonqualified deferred compensation plans?

An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Defined benefit plans specify the amount of benefit an employee will receive on retirement while defined contribution plans specify the amounts that employers and employees will (or can)contribute to an employee's plan.

What is the maximum saver's credit available to any taxpayer in 2019?

Which of the following statements regarding vesting in a defined benefit plan is correct?

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Participating in an employer-sponsored nonqualified deferred compensation plan is potentially risky because employers are not required to fund nonqualified plans.If the employer is not able to pay the employee when the payment is due,the employee usually becomes an unsecured creditor of the employer.

Which of the following statements regarding IRAs is false?

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

Riley participates in his employer's 401(k)plan.He turns 69 years of age on February 15,2019,and he plans on retiring on July 1,2019.When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Tyson (48 years old)owns a traditional IRA with a current balance of $50,000.The balance consists of $30,000 of deductible contributions and $20,000 of account earnings.Convinced that his marginal tax rate will increase in the future,Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA.Assuming his marginal tax rate is 25 percent,what amount of penalty,if any,must Tyson pay on the distribution from the traditional IRA?

When employees contribute to a traditional 401(k)plan,they ________ allowed to deduct the contributions and they ________ taxed on distributions from the plan.