Retirement Flashcards
(84 cards)
Workers Eligibility SS Benefits
RETIRED and over 62: retirement benefits
Disability benefits: under 65, 12 months disabled, 5 months waiting period
Spousal Eligibility SS Benefits
Spouse of RETIRED or DISABLED works gets benefits if:
- 62 and over
- child in care under 16 or disabled
Surviving spouse: 60 and older
Divorced Spouse:
- married for 10 years, age 62, been divorced for 2 years
- child under 16 or disabled child
Money Purchase Pension Plan selection
- flat percentage contribution
- stable work force (wants to retain key young employees)
- simpler to administer
- stable cashflow and profit to make fixed contributions
Target Benefit Pension Plan selection
seeks ADEQUATE retirement benefits for OLDER employees
Profit Sharing Plan selection
- FLEXIBLE employer contribution
- profits vary year to year
- incentive to motivate employees to make the company profitable
- employees young, well paid, and time to save funds
Stock Bonus Plan / ESOP selection
- company wants to broaden stock ownership (ESOP is 1 shareholder of the S Corp)
- NUA
SEP selection
- alternative to a qualified plan profit sharing plan that is easier and less expensive to install
- contributions can vary year to year
DB/DC Salary Cap
$350,000
DC/DB Max contributions
DC: $70k
DB: Stuff it like a pig. $280k back end
Keys for IRA, SIMPLE, SEP, SARSEP
- No Loans, life insurance, or creditor protection
- Immediate vesting
- 59.5 no 55 to avoid 10% penalty
- MUST take RMD at 72
Integrated with Social Security vs. Age Weighted Plan
Integrated with Social Security (wage based)
- Owner is 50 or under
- Owner income is under $200,000
- Rank and File Employees making $90,000 or less
Age Weighted Plan (age based)
- Owner is 50 or older
- Owner income is over $200,000
- Rank and File Employees are YOUNGER than owner
Cross Testing (new comparability plan) most generous to:
Older owner/employee
Parent-Subsidiary
One entity owns at least 80% of the other entities
Brother-Sister
Five or fewer owners of two or more entities own 80% or more of each entity
Affiliated Service Group
a service organization and a professional organization
Direct Distribution to a Qualified Plan Participant
participant received the distribution DIRECTLY, the plan must withhold 20% and the participant has 60 days to transfer it to an IRA and stay there for 1 year or it will be taxed
Qualified Charitable Distribution (QCD)
- must be 70.5 or older
- up to $100,000
Qualified Plan Loans
- cannot exceed LESSOR of 50% vested benefit or $50,000
- small accounts can take $10,000 (if available)
QDRO
- CANNOT override plan provisions
- DOOES NOT apply to IRAs
Roth IRA: contributions, conversions, earnings
contributions: can always withdrawal
conversions: 5 yr rule OR 59.5/special purpose
- if fails: 10% penalty
Earnings: 5 yr rule AND 59.5/special purpose
- if fails one: Income tax
- if fails both: 10% penalty and income taxable
ISO tax implications
$20 grant, $100 exercise, $200 sale
Grant: no tax event
Exercise: AMT, no tax
Sale: $200 - $20 = $180 LTCG
MUST have EGG: sale 1 year from exercise and 2 years from grant
NSO tax implications
$20 grant, $100 exercise, $200 sale
Grant: no tax event
Exercise: 100 - 20 = $80
Sale: $180 LTCG
Pension Beneficiary
Spouse is always the beneficiary and controls the funds. Spouse needs to sign off to change beneficiary.
NUA
Basis is taxed at distribution
Capital gain taxed only when the employee sells
