Unit 10 SIE

What type of plan provides a predetermined benefit amount at retirement, often based on factors like salary and years of service?

Defined Benefit Plan

What is the penalty for not taking the required minimum distribution (RMD) for the year?

25% of the amount short of what should have been taken

Which type of plan might be most appealing to an employee who wants control over investment options?

401k Plan

Your Client, Sven, has an extensive portfolio of stocks and bonds. Last year, he had an income of $36,000, of which $200 a month was from a part-time job and the rest from his portfolio. How much can he contribute to a ROTH IRA for the previous year?

$2,400, which is not deductible from his ordinary incom

Emily, age 60, participates in her company's 401(k) plan and wants to take a withdrawal. What penalty, if any, will she face for withdrawing funds before retirement?

Since Emily is over age 59 ½, she can withdraw funds without penalty, but the withdrawal will be taxed as ordinary income.

Who benefits most from a defined contribution plan?

Younger Employees

All of the following are true of Roth IRAs except

distributions are required after reaching 73.

True facts about Roth IRAs

anyone with earned income under a certain limit may contribute

distributions are not required after reaching 73
contributions are not deductible.

If a 40-year-old customer earns $85,000 a year and his 38-year-old spouse earns $140,000 a year, how much may they contribute to individual retirement accounts (IRAs)?

They may each contribute 100% of earned income or the maximum annual allowable dollar limit, whichever is less.

What is the penalty, if any, for overcontribution to an IRA?

6%

Who is responsible for meeting the desired returns on a defined benefit plan?

The sponsor