ch 13 gottlieb tax

These flashcards present key terms and definitions related to retirement savings and deferred compensation based on the lecture notes.

Defined Benefit Plan

A retirement plan with standard benefits based on a fixed formula, often tied to years of service and average compensation.

Defined Contribution Plan

A retirement plan where the employer specifies the contribution amount, and employees may also contribute, with the investment risk borne by the employee.

401(k) Plan

A type of defined contribution plan allowing employees to save a portion of their paycheck before taxes are taken out.

Roth 401(k) Plan

A retirement savings plan allowing employees to contribute after-tax income, with tax-free withdrawals in retirement.

Traditional IRA

An individually managed retirement account allowing pre-tax contributions, providing tax deductions on contributions.

Roth IRA

An individual retirement account allowing after-tax contributions, where qualified distributions are tax-free.

Vesting Schedule

The process of earning the right to keep employer-paid contributions in a retirement plan, often outlined as cliff or graded schedules.

Saver's Credit

A tax credit for eligible taxpayers contributing to qualified retirement plans, benefiting lower-income individuals.

Catch-up Contribution

An additional contribution limit that allows individuals over age 50 to put extra money into retirement accounts.

Minimum Distribution

The required minimum amount that must be withdrawn from retirement accounts once an individual reaches a certain age.

Taxable Distribution

Distributions from retirement accounts that are subject to income tax when received.

Penalties for Early Distributions

A 10% penalty imposed on early withdrawals from retirement accounts before a specified age.

Actuarial Assumptions

Statistical assumptions used by employers to predict future contribution requirements and liabilities of defined benefit plans.

Annual Compensation Limitation

The cap on the compensation amount that can be considered for calculating benefits in a defined benefit plan.

Nonqualified Deferred Compensation

Retirement plans that may discriminate between employees, typically used for executives or highly compensated employees.

Qualified Charitable Distributions (QCD)

Donations made directly from an IRA to a charity, which can satisfy Required Minimum Distributions (RMDs) without incurring income tax.

Self-Employed Retirement Plans

Retirement accounts such as SEP IRAs and Individual 401(k) plans designed specifically for self-employed individuals.

Nondeductible Contributions

IRA contributions that are not eligible for a tax deduction yet still count towards overall contribution limits.

Social Security Benefits

Monthly payments made to qualified retirees and disabled individuals, funded through payroll taxes.

Income Tax Bracket

The range of income levels that are taxed at a particular rate, which can affect the tax consequences of distributions.