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.

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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.

2.

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.

3.

During retirement, withdrawing too little from your retirement account will lead to a _______ tax penalty.

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6 percent

25 percent

50 percent

25 percent. Withdrawing too little from your retirement account will lead to a 25 percent tax penalty on the difference between the required minimum distribution and the amount you actually withdrew.

4.

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.

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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