Retirement Plans Flashcards
Inheriting an IRA
Spouses - may roll IRA over into their own IRA or continue to own as beneficiary
Non-spouses - Several Options:
- Lump-Sum Distribution
- 5-year payout
- Take RMD’s over the beneficiaries life expectancy
- Take RMD’s based on the life expectancy of the oldest beneficiary
Coverdell / Educational IRA
Max contribution = $2k/yr
Money goes in after-tax and grows tax-deferred
Owned by student
Funds must be used for education purposes
529 plans
pre-paid tuition plan the individual locks in the tuition rate at a school and begins to make payments in advance to pay for tuition.
If a person doesn’t get into the school they can use those funds to pay for a different school
College Savings Account
Saving for when a person is going into college
Funds must be used for educational expenses. Otherwise, withdrawals are taxable.
Keogh
Qualified Plans for self-employed individuals
max contribution = 20% of pre-tax income OR 25% of after tax income. up to the contribution limit
If the business owner contributes money into a Keogh they would be required to do the same for their full-time employees
TSA / TDA (Tax sheltered annuities / Tax deffered account)
for public employees
Corporate Plans (Deferred Compensation Plans)
100% funded by the employee not company.
Types: Pension Defined Benefit Defined Contribution Profit-Sharing 401k Payroll deduction plan Salary Reduction Plan
Defined Benefit
All investment risk bared by the company. Tells the employee what the benefit will be from the beginning
Very expensive for the employer
Defined Contribution Plan
Benefit amount unknown at the start. Employer contributes to a plan for the employee
Profit-Sharing
Employee given stock in the company
401k
Usually a defined contribution plan
Payroll Deduction Plan
Is a non-qualified plan employees talk to payroll and tell them to place $___ of their checks into a mutual fund plan
Salary Reduction Plan
is a qualified plan established by the employer
contributing a portion of the employees check to a 401k/ pension plan prior to taxes
ERISA (Employee Retirement Income Security Act of 1974)
All private sector pension plans are regulated by ERISA
Regulates how pension plans are administered for the benefit of employees
ERISA 404c Safe Harbor
This requires the plan administrators to provide multiple funds to the employees in the fund so they can pick and choose their investments.
Minimum requirements:
fund for Safety
fund for Income
fund for Growth
makes it so the employee can sue for poor performance
