Question

Please help me answer these question 5 question all in one segment

Which of the following statements about nonqualified employer-sponsored retirement plans is TRUE?

Employee contributions are tax-deferred.

Employers are able to deduct an amount for the allowable contributions they make for employees.

Employee contributions are usually made with after-tax dollars.

Taxpayers who change jobs may be able to defer paying taxes on funds in a nonqualified plan by transferring the balance to an IRA.

Lisa, a 42-year-old taxpayer, earned $20,000 in wages. What is the maximum contribution she can make to her 401(k) plan in 2018?

$5,500

$18,500

$20,000

$24,500

Jack has worked for the same corporation for 20 years. When he retires, he will receive an annual pension. The amount of his benefit will be based on the number of years he worked for the company, his age, and the history of his earnings with the company. Jack participates in which of the following types of employer-sponsored retirement plans?

Defined benefit plan.

Defined contribution plan.

401(k) plan.

403(b) plan

Bradley, a 56-year-old taxpayer, earned $40,000 in wages. What is the maximum contribution he could make to his 401(k) plan in 2018?

$6,500

$18,500

$24,500

$55,000

What is the age requirement (if any) to contribute to a Roth IRA?

The taxpayer must be at least age 18 and less than age 70½.

The taxpayer must be at least age 18, but there is no maximum age.

The taxpayer must be at least 19 if not a full-time student, or age 24 if they are a full-time student, but there is no maximum age.

There is no age requirement if the taxpayer meets the compensation requirements.

Answer 1

Answer to 1:

The correct option is 'c', Employee contributions are usually made with after-tax dollars. In non-qualified retirement plans, the employee needs to pay taxes on the amount which is being contributed towards this type of plan.

Answer to 2:

The correct option is 'b', $18,500. In the year 2017, the limit for contribution to 401(k) plan for employees below 50 years of age was $18,000, but the same was increased to $18,500 in the year 2018.

Answer to 3:

The correct option is 'a', Defined benefit plan. This type of retirement plan is employer-sponsored and the employee received the retirement benefits on the basis of his length of service, his age and earning history.

Answer to 4:

The correct option is 'c', $24,500. In the year 2018, the maximum contribution an employee below 50 years of age, can make towards 401(k) plan is $18,500. However, as soon as he attains 50 years of age, he is eligible to further contribute $6,000 as catch-up contribution, thus making total contribution as $24,500.

Answer to 5:

The correct option is 'd', there is no age requirement if the taxpayer meets the compensation requirements. In Roth IRA, anybody can contribute, right from the baby to an old one and just need earned income to make contribution.