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Series 6

Retirement and College Savings Plans - Review Answers




  1. "b" - The maximum amount Paul and Wendy can contribute to a spousal IRA is $8,000 or 100% of Wendy's annual income, whichever is less.

  2. "d" - The penalty for making withdrawals from an IRA prior to reaching 59.5 years of age is 10%.

  3. "d" - To avoid a tax penalty, IRA withdrawals must start by the page of 70.5.

  4. "c" - The maximum contribution for employees often changes annually, with the 2012 amount being $17,000 and the previous 3 years at $16,500.

  5. "a" - An early withdrawal from an IRA is permitted when the account holder becomes deceased or disabled.

  6. "b" - IRA's are non-qualified retirement plans.

  7. "a" - The amount paid into a defined-contribution plan varies according to the formula indicated within the plan's trust agreement.

  8. "a" - A qualified profit-sharing plan's contributions are tax-deductible for the employer, not the employee.

  9. "c" - Deferred-compensation plans are often a way to reward key employees for their years of service. They are simply a contract between the employer and certain employees to which the employer agrees to pay a certain amount of compensation at retirement, termination of employment, disability or death.

  10. "b" - The performance of investments is not a standard requirement under ERISA for an employer-sponsored retirement plan to be qualified.

  11. "d" - If Tom opens a Coverdell ESA for his grandson, the most he can contribute is $2,000.

  12. "c" - A teacher at a university would be eligible to participate in a 403(b) plans, since participation is limited to employees of public schools, state colleges and universities, churches, and other nonprofit organizations with tax-exempt status.

  13. "a" - According to ERISA, employing consultants to administer the plan would NOT be a prohibited transaction.

  14. "d" - Earnings are withdrawn tax-free after age 59.5, as long as the account has been open at least five years.

  15. "d" - A defined benefit plan. If he stays with the company for 25 years, he will receive roughly 55% of his annual salary for the remainder of his life once he turns 65. Defined contribution plans depend on the amount an employee has contributed, and the performance of the chosen investments in that portfolio.

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