Strategy Intermediate: Avoiding Taxes at Retirement

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1.

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.

Choose wisely. There is only one correct answer.

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.

2.

An annuity is a contract with a life insurance company.

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True

False

True. An annuity can be bought only from an insurance company.

3.

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.

4.

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.

5.

Retirement plan distributions are added to your overall taxable income.

Choose wisely. There is only one correct answer.

True

False

True. The IRS treats them as taxable income.

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