CFP Key Items

Roth IRA Distribution Ordering

1. Regular contributions

   1. always tax free and penalty free, no restrictions

2. Conversions

   1. tax free. 10% penalty if withdrawn within 5 years AND under age 59½

3. Earnings

   1. Tax free only if qualified (5 years and 59½)

   2. 10% penalty if no exception applies

FICA Taxes

6.2% on all wages up to $184,500

1,45% on all wages

HO2 vs HO3 vs HO5

HO2: broad

HO3: special - open/named

HO5: comprehensive

What Affects Duration?

Coupon rate-inverse

YTM-inverse

time to maturity-direct

What Affects Convexity?

coupon rate-inverse

time to maturity-direct

yield-inverse

Standard Deduction for Dependents

$1,350 or eanred income plus $450

Safe Harbor Tax

LESSER of 90% current year or 100% of prior year (110% if AGI exceeds $150k)

Highly Compensated Employee

greater than 5% owner or an employee with comp in excess of $160k

Key Employee

greater than 5% owner, greater than 1% owner with comp in excess of $150k or an officer with comp in excess of $235k

Defined Benefit Plans

Defined benefit and cash balance

Defined Contribution Pension Plans

money purchase and target benefit

ADP Schedule

NHC ADP: 0-2% HC ADP: 2x

NHC ADP: 2-8% HC ADP: 2% +

NHC ADP: 8%+ HC ADP: 1.25x

RMD Rules for Beneficiaries

Eligible designated: can be rolled or distributed over beneficiary life expectancy

Designated: 10 year rule

non-designated: After RMD - use owner’s age

before RMD- 5 year rule

Which Pensions Favor Younger People?

cash balance and money purchase

Social Security Taxability

Single: 25k-34k 50%

34k+ 85%

MFJ: 32k-44k 50%

More than 44k: 85%