Retirement Plans and IRA Concepts

These flashcards cover key vocabulary related to retirement plans, including types of plans, their characteristics, and important rules about IRAs.

Qualified plans

Retirement plans that meet federal requirements and receive favorable tax treatment.

Non-qualified plans

Retirement plans that do not meet specific federal requirements.

Top-heavy plan

A retirement plan where more than 60% of the assets are attributable to key employees.

ERISA

The Employee Retirement Income Security Act, aimed at protecting workers' rights under employer-sponsored plans.

Vesting

The right employees have to the retirement funds contributed by their employer.

Defined contribution plan

A retirement plan primarily funded by employee contributions, with benefits based on total contributions plus earnings.

Profit-sharing plan

A type of defined contribution plan that allows employees to participate in the profits of the company.

Tax-sheltered annuities

Retirement plans established for employees of specified non-profit organizations and schools.

Keogh plan

A qualified retirement plan designed for unincorporated businesses.

SIMPLE plan

A retirement plan for small businesses with no more than 100 employees, structured as an IRA or 401(k).

Traditional IRA

An individual retirement account where contributions may be tax-deductible, and taxes are deferred until withdrawal.

Roth IRA

An individual retirement account that allows tax-free withdrawals under certain conditions.

Early distribution penalty

A 10% tax penalty for withdrawing funds from retirement accounts before a certain age, with exceptions.

Rollovers

Transfer of funds from one IRA to another without incurring tax penalties if done correctly.