Question 1

A SEP IRA is an example of a self-employed retirement account.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  A taxpayer may contribute to a Roth IRA at any age but a taxpayer is not allowed to contribute to a traditional IRA after reaching 70½ years of age. 
B)  The annual contribution limits for a traditional IRA and Roth IRA are the same. 
C)  Taxpayers with high income are allowed to contribute to traditional IRAs but not to Roth IRAs. 
D)  All of these are true statements.

Question 3

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?

Accepted Answer

A)  $0. 
B)  $1,250. 
C)  $3,750. 
D)  $5,000.

Question 4

Riley participates in his employer's 401(k) plan. He turns 69 years of age on February 15, 2014, and he plans on retiring on July 1, 2014. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Accepted Answer

A)  by April 1, 2014 
B)  by April 1, 2015 
C)  by April 1, 2016 
D)  by April 1, 2017

Question 5

Which of the following statements regarding traditional IRAs is true?

Accepted Answer

A)  Once a taxpayer reaches age 55 years of age she is allowed to contribute an additional $1,000 a year. 
B)  Taxpayers with high income are not allowed to contribute to traditional IRAs. 
C)  Taxpayers who participate in an employer-sponsored retirement plan are allowed to deduct contributions to a traditional IRA regardless of their AGI. 
D)  A single taxpayer with no earned income is not allowed to deduct contributions to traditional IRAs.

Question 6

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

Accepted Answer

A) True 
 B)False

Question 7

Kathy is 60 years of age and self-employed. During 2014 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 2014?

Accepted Answer

A)  $11,152 
B)  $16,652 
C)  $57,500 
D)  $52,000

Question 8

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

Accepted Answer

A)  A self-employed taxpayer who has hired employees may not set up a SEP IRA. 
B)  A self-employed taxpayer who has hired employees may set up either a SEP IRA or an individual 401(k). 
C)  A self-employed taxpayer who has hired employees may not set up an individual 401(k). 
D)  All of these statements are false.

Question 9

Amy files as a head of household. She determined her 2014 adjusted gross income was $70,000. During the year, she contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for 2014?

Accepted Answer

A)  $1,000 
B)  $2,000 
C)  $2,500 
D)  $1,250 
E)  $0

Question 10

Riley participates in his employer's 401(k) plan. He turns 70 years of age on February 15, 2013 and he plans on retiring on July 1, 2015. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Accepted Answer

A)  by April 1, 2013 
B)  by April 1, 2014 
C)  by April 1, 2015 
D)  by April 1, 2016

Question 11

Aiko (single, age 29) earned $40,000 in 2014. He was able to contribute $1,800 ($150/month) to his employer sponsored 401(k). What is the total saver's credit that Aiko can claim for 2014?

Accepted Answer

The answer of Aiko (single, age 29) earned $40,000 in...

Question 12

Deborah (single, age 29) earned $25,000 in 2014. Deborah was able to contribute $1,800 ($150/month) to her employer sponsored 401(k). What is the total saver's credit that Deborah can claim for 2014?

Accepted Answer

The answer of Deborah (single, age 29) earned $25,000 in...

Question 13

Kathy is 60 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)?

Accepted Answer

A)  $28,652 
B)  $34,152 
C)  $52,000 
D)  $57,500

Question 14

Joan recently started her career with PDEK Accounting, LLP which provides a defined benefit plan for all employees. Employees receive 1.5 percent of the average of their three highest annual salaries for each full year of service. Plan benefits vest under a 5-year cliff schedule. Joan worked 5½ years at PDEK before leaving for another opportunity. She received an annual salary of $49,000, $52,000, $58,000, $65,000, and $75,000 for years one through five respectively. Joan earned $40,000 of her $80,000 annual salary in year six. What is the vested benefit Joan is entitled to receive from PDEK for her retirement?

Accepted Answer

The answer of Joan recently started her career with PDEK...

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

Qualified retirement plans include defined benefit plans but not defined contribution plans.

Accepted Answer

A) True 
 B)False

Question 17

In 2014, Jessica retired at the age of 65. The current balance in her traditional IRA was $200,000. Over the years, Jessica had made $20,000 of nondeductible contributions and $60,000 of deductible contributions to the account. If Jessica receives a $50,000 distribution from the IRA, what amount of the distribution is taxable?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $37,500 
D)  $45,000 
E)  $50,000

Question 18

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.

Accepted Answer

The answer of Cassandra, age 33, has made deductible contributions...

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  May discriminate against rank and file employees. 
B)  Deductible contributions are generally phased-out based on AGI. 
C)  Executives are generally ineligible to participate in these plans. 
D)  They are generally referred to as defined benefit plans or defined contribution plans.

Exam 13: Retirement Savings and Deferred Compensation

A SEP IRA is an example of a self-employed retirement account.

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

Riley participates in his employer's 401(k) plan. He turns 69 years of age on February 15, 2014, and he plans on retiring on July 1, 2014. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Which of the following statements regarding traditional IRAs is true?

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

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

Amy files as a head of household. She determined her 2014 adjusted gross income was $70,000. During the year, she contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for 2014?

Riley participates in his employer's 401(k) plan. He turns 70 years of age on February 15, 2013 and he plans on retiring on July 1, 2015. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Aiko (single, age 29) earned $40,000 in 2014. He was able to contribute $1,800 ($150/month) to his employer sponsored 401(k). What is the total saver's credit that Aiko can claim for 2014?

Deborah (single, age 29) earned $25,000 in 2014. Deborah was able to contribute $1,800 ($150/month) to her employer sponsored 401(k). What is the total saver's credit that Deborah can claim for 2014?

Kathy is 60 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) ?

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.

Qualified retirement plans include defined benefit plans but not defined contribution plans.

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?