Exam 13: Retirement Savings and Deferred Compensation

Retired taxpayers over 59½ years of age at the end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty.Minimum distributions are required for the year in which an employee reaches 70½ years of age or retires,whichever comes later.

If a taxpayer's marginal tax rate is decreasing,a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

Riley participates in his employer's 401(k) plan.He turns 70 years of age on February 15,2012 and he plans on retiring on July 1,2014.When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

From a tax perspective,participating in a nonqualified deferred compensation plan is an effective tax planning strategy when the employee anticipates that her marginal tax rate will be higher when she receives the deferred compensation than when she defers the compensation.

Which of the following statements regarding Roth 401(k) accounts is false?

Which of the following describes a defined benefit plan?

On December 1,2013 Irene turned 71 years old.She is still working for her employer and she participates in her employer's 401(k) plan.Irene is not required to receive a minimum distribution for 2013 from her 401(k) account because she has not yet retired.Minimum distributions are required by April 1 of the later of (1) the year after the year in which the employee turns 70½ or (2) the year after the year the employee retires.

Which of the following describes a defined contribution plan?

Which of the following statements concerning traditional IRAs and Roth IRAs is true?

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

Carmello and Leslie (ages 34 and 35,respectively) are married and want to contribute to a Roth IRA.In 2013,their AGI totaled $42,000.Of the $42,000,Carmello earned $35,000 and Leslie earned $7,000.How much can each spouse contribute to a Roth IRA if they file jointly? How much can each spouse contribute to a Roth IRA if they file separately?

Darren is eligible to contribute to a traditional 401(k) in 2013.He forgot to contribute before year end.If he contributes before April 15,2014,he is allowed to treat the contribution as though he made it during 2013.

Which of the following statements comparing qualified defined contribution plans and nonqualified deferred compensation plans is false?

Which of the following taxpayers is most likely to qualify for the saver's credit?

In 2013,Ryan contributes 10 percent of his $75,000 annual salary to a Roth 401(k) account sponsored by his employer,XYZ.XYZ offers a dollar-for-dollar match up to 10 percent of the employee's salary.The employer contributions are placed in a traditional 401(k) account on the employee's behalf.Ryan expects to earn an 8-percent before-tax rate of return on contributions to his Roth and traditional 401(k) accounts.Assuming Ryan leaves the funds in the accounts until he retires in 25 years,what are his after-tax accumulations in the Roth 401(k) and in the traditional 401(k) accounts if his marginal tax rate at retirement is 30 percent? If Ryan's marginal tax rate in 2013 is 35 percent will he earn a higher after tax rate of return from the Roth 401(k) or the traditional 401(k) ? Explain.

Lisa,age 45,needed some cash so she received a $50,000 distribution from her Roth IRA.At the time of the distribution,the balance in the Roth IRA was $200,000.Lisa established the Roth IRA 8 years ago.Through a rollover and annual contributions,she has contributed $80,000 to her account.What amount of the distribution is taxable and subject to early distribution penalty?

A taxpayer can only receive a saver's credit if she contributes to a qualified retirement account.

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

Kathy is 60 years of age and self-employed.During the year she reported $400,000 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 this year to a simplified employee pension (SEP) IRA?

What is the maximum saver's credit available to any taxpayer in 2013?