Exam 13: Retirement Savings and Deferred Compensation

Which of the following statements regarding contributions to defined contribution plans is true?

Which of the following is a true statement regarding saving for retirement?

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?

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

Shauna received a distribution from her 401(k)account this year.In which of the following situations will Shauna be subject to an early distribution penalty?

Which of the following best describes distributions from a traditional defined contribution plan?

Lisa,age 45,needed some cash so she withdrew $50,000 from her Roth IRA.At the time of the distribution,the balance in the Roth IRA was $200,000.Lisa established the Roth IRA 10 years ago.Over the years,she has contributed $20,000 to her account.What amount of the distribution is taxable and subject to early distribution penalty?

Taxpayers withdrawing funds from an IRA before they turn 70½ are generally subject to a 10 percent penalty on the amount of the withdrawal.

Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Qualified distributions from traditional IRAs are nontaxable while qualified distributions from Roth IRAs are fully taxable as ordinary income.

Darren is eligible to contribute to a traditional 401(k)in 2017.He forgot to contribute before year-end.If he contributes before April 15,2018,he is allowed to treat the contribution as though he made it during 2017.

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%,what amount of penalty,if any,must Tyson pay on the distribution from the traditional IRA?

Scott and his wife Leanne (ages 39 and 37 respectively)earned $50,000 in 2017.Scott was able to contribute $2,400 ($200/month)to his employer sponsored 401(k).What amount of saver's credit can Scott and Leanne claim in 2017?

In general,which of the following statements regarding self-employed retirement accounts is true?

Employees who are at least 50 years old at the end of the year are allowed to contribute more to their 401(k)accounts than employees who are not 50 years old by year-end.

Which of the following statements is true regarding employer-provided qualified retirement plans?

Henry has been working for Cars Corp.for 40 years and 4 months.Cars Corp.provides a defined benefit plan for its employees.Under the plan,employees receive 2 percent of the average of their three highest annual salaries for each full year of service.Cars Corp.uses a five year cliff vesting schedule.Henry retired on January 1,2017 Henry received annual salaries of $520,000,$540,000,and $560,000 for 2014,2015,and 2016,respectively.What is the maximum benefit Henry can receive under the plan in 2017?

Cassandra,age 33,has made deductible contributions to her traditional IRA over the years.When the balance in her IRA was $40,000,Cassandra received a distribution of $34,000 from her IRA in order to purchase a new car.How much of the $34,000 distribution will she have remaining after paying income taxes and early distribution penalties on the distribution? Her marginal tax rate is 25 percent.

Kathy is 48 years of age and self-employed.During 2017 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 2017? (Round your final answer to the nearest whole number)

Heidi retired from GE (her employer)at age 56.At the end of the year,when she was 56 years of age,Heidi received a distribution from her GE sponsored 401(k)account.Because Heidi was not at least 59½ years of age at the time of the distribution,she must pay tax on the full amount of the distribution and a 10 percent penalty on the full amount of the distribution.