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1.
How do the contribution limits of SIMPLE and SEP plans compare to the contribution limits of traditional IRAs?
They are higher. An advantage of both plans is that they allow participants to contribute much more than a traditional IRA allows.
2.
An ordinary savings account offers no tax protection for retirement savings.
True. You must pay tax on both the income you earn before depositing into a savings account and on the interest your deposits earn.
3.
Tax-deferral means _______.
You don't pay taxes on your retirement earnings until you withdraw them. Tax-deferral means your earnings are sheltered, though you may still be taxed on your contributions and on your savings when you withdraw them.
4.
What is the maximum percentage of your income that you can contribute to a Keogh plan?
100%. You can contribute up to 100%, up to a yearly dollar maximum.
5.
If your employer matches your contributions to your 401(k) plan, what is the amount of the match?
The amount varies. Matching is not required by law, but an employer who does will match anywhere from 1 to 100% of your contribution.
6.
A traditional IRA is like a 401(k) plan in that _______.
It is a tax-deferred plan. Both traditional IRAs and 401(k) plans are tax-deferred, but income you contribute to an IRA may be taxed under certain circumstances.
7.
A non-qualified annuity doesn't provide as much tax protection as a 401(k) plan because _______.
Contributions aren't pre-tax. There are no tax savings on the income you contribute to the annuity, even though the earnings are tax-deferred.