Taking Money Out of Retirement Plans

Transcription

1 Taking Money Out of Retirement Plans Twila Slesnick, PhD, Enrolled Agent John C. Suttle, CPA, Attorney

2 Chapter 1 Types of Retirement Plans... 1 Learning Objectives... 1 Introduction... 1 Qualified Plans... 3 Profit-Sharing Plans... 3 Stock Bonus Plans... 5 Money Purchase Pension Plans... 5 Employee Stock Ownership Plans (ESOPs)... 5 Defined Benefit Plans... 5 Target Benefit Plans... 6 Plans for Self-Employed People (Keoghs)... 6 Individual Retirement Accounts... 6 Traditional Contributory IRAs... 7 Rollover IRAs... 7 Simplified Employee Pensions... 7 SIMPLE IRAs... 8 Roth IRAs... 9 Almost-Qualified Plans... 9 Qualified Annuity Plans... 9 Tax-Deferred Annuities... 9 Nonqualified Plans Review Questions Review Answers Chapter 2 An Overview of Tax Rules Learning Objectives Introduction Taxation Fundamentals Defer the Payment of Tax Pay Tax at the Lowest Rate Avoid Tax Penalties General Income Tax Rules for Retirement Plans Distributions Are Taxable Immediately Your Basis Is Not Taxable You Don t Have to Withdraw Cash You May Not Claim Losses Divorce or Inheritance Doesn t Change the Basic Tax Rules Income Tax on Qualified Plans and Qualified Annuities Options for Paying Taxes at Retirement Options for Paying Taxes Before Retirement Options for Paying Taxes on Inherited Plans Options for Paying Taxes on Qualified Plans Received at Divorce Withholding Money to Pay Taxes Loans From Qualified Plans Hardship Distributions From Qualified Plans Special Income Tax Rules for Tax-Deferred Annuities Special Income Tax Rules for IRAs Ordinary Income Tax Applies Rollover Allowed Averaging and Capital Gain Treatment Not Allowed Special Rules at Divorce or Separation Mandatory Withholding Doesn t Apply... 42

3 Loans Not Allowed Hardship Distributions Not Allowed How Penalties Can Guide Planning Review Questions Review Answers Chapter 3 Early Distributions: Taking Your Money Out Before the Law Allows Learning Objectives Introduction Exceptions to the Early Distribution Tax Age 59½ Death Disability Substantially Equal Periodic Payments Leaving Your Job After Age Dividends From ESOPs Medical Expenses QDRO Payments Federal Tax Levy Refunds Calculating the Tax Reporting the Tax Special Rules for IRAs Rules Applicable to All IRAs Except Roth IRAs One Rule Applicable Only to SIMPLE IRAs Review Questions Review Answers Chapter 4 Substantially Equal Periodic Payments Learning Objectives Introduction Computing Periodic Payments Method One: Required Minimum Distribution Method Two: Fixed Amortization Method Three: Fixed Annuitization Implementing and Reporting Your Decision Modifying the Payments The No-Modification Rule Exceptions to the No-Modification Rule Penalties for Breaking the No-Modification Rule Review Questions Review Answers Chapter 5 Required Distributions: Taking Money Out When You Have To Learning Objectives Introduction Required Distributions During Your Lifetime Death Before Required Beginning Date Death After Required Beginning Date Special Rules for Tax-Deferred Annuities Special Rules for Roth IRAs Penalty Innocent Blunders Chronic Errors... 87

4 Ineligible Rollovers Excess Contributions Reporting the Penalty Waiver Terms of the Waiver Requesting a Waiver Review Questions Review Answers Chapter 6 Required Distributions During Your Lifetime Learning Objectives Introduction Required Beginning Date First Year Second Year and Beyond Computing the Required Amount Determining the Account Balance Determining the Applicable Distribution Period Computing the Required Distribution Special Aggregation Rule for IRAs and TDAs Reporting Distributions From IRAs Designating a Beneficiary Definition of Designated Beneficiary Multiple Beneficiaries Special Rules for Annuities Form of Payment Required Beginning Date Starting Early Young Beneficiaries Divorce or Separation Separate Account No Separate Account Income Taxes and Penalties Rollovers Review Questions Review Answers Chapter 7 Distributions to Your Beneficiary If You Die Before Age 70½ Learning Objectives Introduction Determining the Designated Beneficiary Deadline for Determining Designated Beneficiary Changing Beneficiaries Before the Deadline Distribution Methods Life Expectancy Rule Five-Year Rule Rollover Effect of the Retirement Plan s Rules Spouse Beneficiary Life Expectancy Rule Rollover Convert to Roth IRA Death of Spouse Beneficiary Nonspouse Beneficiary Life Expectancy Rule

5 Rollover Convert to a Roth IRA Death of Nonspouse Beneficiary No Designated Beneficiary Five-Year Rule No Life Expectancy Rule Multiple Beneficiaries, Separate Accounts Multiple Beneficiaries, One Account Life Expectancy Rule Five-Year Rule Splitting Accounts After Death When a Spouse Is One of the Beneficiaries Designated and Nondesignated Beneficiaries Trust Beneficiary Nonspouse Beneficiary of Trust Spouse Beneficiary of Trust Multiple Beneficiaries of Trust Trust Beneficiary and Spousal Rollovers Estate as Beneficiary Annuities Start Date Form of Payment Irrevocable Annuity Divorce or Separation Separate Account No Separate Account Reporting Distributions From IRAs Review Questions Review Answers Chapter 8 Distributions to Your Beneficiary If You Die After Age 70½ Learning Objectives Introduction Administrative Details Name on the Account Timing of Distributions Designated Beneficiary Reporting Distributions Spouse Beneficiary Year of Death Second Year and Beyond Rollover Convert to a Roth IRA Death of Spouse Beneficiary Nonspouse Beneficiary Year of Death Second Year and Beyond Death of Nonspouse Beneficiary Rollover Convert to a Roth IRA No Designated Beneficiary Multiple Beneficiaries, Separate Accounts Multiple Beneficiaries, One Account Determining the Designated Beneficiary Computing the Required Distribution

6 Splitting Accounts When a Spouse Is One of the Beneficiaries Trust Beneficiary Nonspouse Beneficiary of Trust Spouse Beneficiary of Trust Multiple Beneficiaries of Trust Trust Beneficiary and Spousal Rollovers Estate as Beneficiary Annuities Divorce or Separation Review Questions Review Answers Chapter 9 Roth IRAs Learning Objectives Introduction Taxation of Distributions Distribution of Nondeductible Contributions Distribution of Investment Returns Conversions and Rollovers Correcting Errors: Recharacterizing Early Distribution Tax Qualified Distributions Nonqualified Distributions Ordering of Distributions Required Distributions During Your Lifetime After Your Death, Before Your RBD After Your Death, After Your RBD Review Questions Review Answers Chapter 10 Roth 401(k) Plans Learning Objectives Introduction Taxation of Distributions Distribution of After-Tax Amounts Distribution of Pretax Earnings Conversions and Rollovers Early Distribution Tax Qualified Distributions Nonqualified Distributions Ordering of Distributions Required Distributions Required Distributions During Your Lifetime Required Distributions After Your Death Review Questions Review Answers Glossary Appendix A IRS Forms, Notices, and Schedules Appendix B Life Expectancy Tables Index