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Exam 13: Retirement Savings and Deferred Compensation

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Question 41

Multiple Choice

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Riley participates in his employer's 401(k) plan.He turns 69 years of age on February 15,2013,and he plans on retiring on July 1,2013.When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

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

E) A) and D)
F) B) and D)

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Question 42

Multiple Choice

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Amy files as a head of household.She determined her 2013 adjusted gross income was $60,000.During the year,she contributed $2,500 to a Roth IRA.What is the maximum saver's credit she may claim for 2013?

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

F) All of the above
G) A) and D)

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Question 43

Multiple Choice

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When employees contribute to a traditional 401(k) plan,they _____ allowed to deduct the contributions and they ______ taxed on distributions from the plan.

Gordon is a 52-year-old self-employed contractor (no employees) .During 2013,his Schedule C net income was $88,000.What is the maximum amount that Gordon can contribute to (1) a SEP IRA and (2) an individual 401(k) ? (Round your answers to the nearest whole number)

Employee contributions to traditional 401(k) accounts are deductible by the employee,but employee contributions to Roth 401(k) accounts are not.

During 2013 Jacob,a 19 year old full-time student,earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan.The general limit for deductible contributions during 2013 is $5,500.How much of a tax-deductible contribution can Jacob make to an IRA?

Heidi has contributed $20,000 in total to her Roth 401(k) account over a six year period.In 2013,when her account was worth $50,000 and Heidi was in desperate need of cash,Heidi received a $30,000 nonqualified distribution from the account.How much of the distribution will be subject to income tax and 10% penalty?

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

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.

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

When an employer matches an employee's contribution to the employee's 401(k) account,the employee is immediately taxed on the amount of the employer's matching contribution.

Which of the following statements is true regarding taxpayers receiving distributions from traditional defined contribution plans?

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

Amy is single.During 2013,she determined her adjusted gross income was $12,000.During the year,Amy also contributed $2,500 to a Roth IRA.What is the maximum saver's credit she may claim for the year?

When a taxpayer receives a nonqualified distribution from a Roth 401(k) account the taxpayer contributions are deemed to be distributed first.If the amount of the distribution exceeds the taxpayer contributions,the remainder is from the account earnings.

Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Taxpayers withdrawing funds from an IRA before they turn 70½ are generally subject to a 10 percent penalty on the amount of the withdrawal.

Which of the following best describes distributions from a defined benefit plan?

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?

Dean has earned $70,000 annually for the past 4½ years working as an architect for MWC.Under MWC's defined benefit plan (which uses a 5-year cliff 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.What is Dean's vested benefit (or annual benefit he has earned so far) ?