Chapter 3: Money in Review – Flashcards

This is not a retirement plan

An Educational Savings Account (ESA) is used for _________________.

The _________________ IRA grows tax-free.

True/False An IRA is a specific type of investment.

True/False When you leave a company, don't move your money from the retirement account.

True/ False Never borrow money from your retirement plan.

True/ False Savings bonds are a good way to save for college.

True/False Pre-tax means the government is letting you invest money before taxes have been taken out.

The typical retirement plan found in non-profit groups such as schools and hospitals

Used for college savings

The typical retirement plan found in most corporations

Grows tax-free

Retirement plan for self-employed people

defined contribution plan offered by a corporation to its employees, which allows employees to set aside tax-deferred income for retirement purposes; in some cases, employers will match their contributions.

retirement plan similar to a 401(k) plan, but one that is offered by n on-profit organizations, such as hospitals, schools, and some charitable organizations, rather than corporations; employees set aside tax-deferred dollars.

non-qualified, deferred compensation plan established by state and local governments for tax-exempt government agencies and tax exempt employers; eligible employees are allowed to make salary deferral contributions to the 457 plan; earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan.

college savings plan that allows individuals to save in a tax-deferred basis in order to fund future college and graduate school expenses of a child or beneficiary; generally sponsored by a state, these are professionally managed investments.

movement of tax-deferred retirement plan money from one qualified plan or custodian to another; results in no immediate tax liabilities or penalties, but requires IRS reporting.

Educational Savings Account - after-tax college fund that grows tax-free for educational uses; eligibility based on parents' annual income.

Individual Retirement Arrangement - tax-deferred arrangement for individuals with earned income and their non-income-producing spouses; growth is not taxed until the money is withdrawn; contributions to an IRA are often tax-deductible.

paying for college ahead of time by accumulating units of tuition.

movement of funds from a tax-deferred retirement plan from one qualified plan or custodian to another; incurs no immediate tax liabilities or penalties, but requires IRS reporting.

retirement account funded with after-tax dollars that subsequently grows fax free.

Simplified Employee Pension Plan - pension plan in which both the employee and the employer contribute to an individual retirement account; also available to the self-employed.

money that is working for you, either tax-deferred or tax-free, within a retirement plan.

Uniform Gifts to Minors Act - legislation that provides a tax-effective manner of transferring property to minors without the complications of trust or guardianship restrictions.

Uniform Transfers to Minors Act - law similar to the UGMA (Uniform Gifts to Minors Act) that extends the definition of gifts to include real estate, paintings royalties and patents.

These are not a benefit of the Roth IRA.

If your company provides a 100% match up to 6%, how much should you personally contribute to your 401(k) if you earn $35,000 (not including the money the company contributed)

If you contribute $2,300 to your 401(k) and your company matches up to 3%, how much is in the account (assume you have not gone over the 3% match)?

This is what you should do with your retirement accounts when you leave a company.

Neither of these should be used for college savings.

What is Baby Step #5?

If Carol and Joe are debt free, how much should they be investing in retirement plans if their combined income is $145,000?