Exam 13: Retirement Savings and Deferred Compensation

Kathy is 48 years of age and self-employed.During the year 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 an individual 401(k) ?

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 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?

Both employers and employees may contribute to defined contribution plans.However,the amount that employees may contribute to the plan in a given year is limited by the tax law while the amount that employers may contribute is not.

Sean (age 74 at end of 2012) retired five years ago.The balance in his 401(k) account on December 31,2012 was $1,700,000 and the balance in his account on December 31,2013 was $1,800,000.Using the IRS tables below,what is Sean's required minimum distribution for 2013?

Which of the following statements regarding IRAs is false?

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.

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to contribute to individual retirement accounts (IRAs) .

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

Dean has earned $70,000 annually for the past five years working as an architect for MWC Inc.Under MWC's defined benefit plan (which uses a 7-year graded vesting schedule) employees earn a benefit equal to 3.5% of the average of their three highest annual salaries for every full year of service with MWC.Dean has worked for five full years for MWC and his vesting percentage is 60%.What is Dean's vested benefit (or annual retirement benefit he has earned so far) ?

Jacob participates in his employer's defined benefit plan.He has worked for his employer for four full years.If his employer uses a five-year cliff vesting schedule,Jacob will need to work another year in order to vest in any of his defined benefit plan retirement benefits.

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 statements regarding contributions to defined contribution plans is true?

Shauna received a $100,000 distribution from her 401(k) account this year.Assuming Shauna's marginal tax rate is 25%,what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59^th birthday and she has not yet retired?

Taxpayers never pay tax on the earnings of a traditional 401(k) account.

Which of the following statements regarding traditional IRAs is true?