Strategy Intermediate: Avoiding Taxes at Retirement

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Retirement plan distributions are added to your overall taxable income.

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True

False

True. The IRS treats them as taxable income.

Earned income includes retirement and Social Security benefits.

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True

False

False. The income you get from working is called earned income. Retirement and Social Security benefits are unearned income.

Your minimum required retirement distribution will be higher if you use the joint life expectancy of you and a younger spousal beneficiary in the calculation.

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True

False

False. Using the joint life expectancy of you and a spousal beneficiary who is 10 or more years younger lowers your minimum required retirement distribution.

Retirement plan balances left to a spouse are subject to a maximum 75 percent estate tax.

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True

False

False. Retirement plan balances left to a spouse qualify for a tax-free transfer.

Going over the contribution limit in your retirement account will lead to a _______ tax penalty.

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6 percent

10 percent

25 percent

6 percent. This penalty is meant to discourage overcontributing.

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