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Exam 13: Retirement Savings and Deferred Compensation

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Question 51

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Lisa,age 45,needed some cash so she withdrew $50,000 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) $0.
B) $20,000.
C) $30,000.
D) $50,000.

E) A) and B)
F) None of the above

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Question 52

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

A) Under a cliff vesting schedule, a portion of an employee's benefits vest each year.
B) Under a graded vesting schedule, an employee's entire benefit vests all at the same time.
C) When an employee's benefits vest, she is entitled to participate in the employer's defined benefit plan.
D) When an employee's benefits vest, she is legally entitled to receive the vested benefits.

E) A) and C)
F) None of the above

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Question 53

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Daniela retired at the age of 65.The current balance in her Roth IRA is $200,000.Daniela established the Roth IRA 10 years ago.Through a rollover and annual contributions Daniela has contributed $80,000 to her account.If Daniela receives a $50,000 distribution from the Roth IRA,what amount of the distribution is taxable?

Christina made a one-time contribution of $12,000 to her 401(k)account,and she received a matching contribution from her employer in the amount of $4,000.Christina expects to earn a 6-percent before-tax rate of return on her account balance.Assuming Christina withdraws the entire balance in 25 years when she retires,what is Christina's after-tax accumulation from the $12,000 contribution to her 401(k)account? Assume her marginal tax rate at retirement is 35 percent.(Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)

Sean (age 74 at end of 2017)retired five years ago.The balance in his 401(k)account on December 31,2016 was $1,700,000 and the balance in his account on December 31,2017 was $1,800,000.Using the IRS tables below,what is Sean's required minimum distribution for 2017? $\begin{array} { c c c } \text { Age of Participarit } & \text { Distribution Period } & \text { Applicable Percentage } \\70 & 27.4 & 3.65 \% \\71 & 26.5 & 3.77 \% \\72 & 25.6 & 3.91 \% \\73 & 24.7 & 4.05 \% \\74 & 23.8 & 4.20 \% \\75 & 22.9 & 4.37 \%\end{array}$

Carmello and Leslie (ages 34 and 35,respectively)are married and want to contribute to a Roth IRA.In 2017,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?

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

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.Tyson's marginal tax rate is 25%.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.He retains $12,500 to pay tax on the distribution and he contributes $37,500 to a Roth IRA.What amount of income tax and penalty must Tyson pay on this series of transactions?

Katrina's executive compensation package allows her to participate in the company's nonqualified deferred compensation plan.This year,Katrina defers 20 percent of her $400,000 salary.Katrina's deemed investment choice will earn 7 percent annually on the deferred compensation until she takes a lump sum distribution in 10 years.Katrina's current marginal tax rate is 30 percent and she expects her marginal tax rate will be 35 percent upon receipt of the deferred salary.What is her after-tax accumulation from the deferred salary in 10 years? (Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)

Which of the following statements regarding defined contribution plans is false?

Kathy is 60 years of age and self-employed.During 2017 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 2017? (Round your final answer to the nearest whole number)

Which of the following statements describes how a traditional 401(k) account is similar to a 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 Roth 401(k) accounts is false?

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to deduct contributions to individual retirement accounts (IRAs)under any circumstances.

Distributions from defined benefit plans are taxed as long-term capital gains to beneficiaries.

Which of the following statements concerning individual 401(k) s is false?

Georgeanne has been employed by SEC Corp.for the last 2½ years.Georgeanne participates in SEC's 401(k)plan.During her employment,Georgeanne has contributed $6,000 to her 401(k)account.SEC has contributed $3,000 to Georgeanne's 401(k)account (it matched 50 cents of every dollar contributed).SEC uses a three-year cliff vesting schedule.If Georgeanne were to quit her job with SEC,what would be her vested benefit in her 401(k)account (assume the account balance is $9,000)?

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

What is the maximum saver's credit available to any taxpayer in 2017?