1 / 17

Session 9 IRAs–Traditional Deductions and Roth Contributions

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Retirement Planning & Employee Benefits. Session 9 IRAs–Traditional Deductions and Roth Contributions. Session Details. IRA Statutory Requirements.

lamis
Download Presentation

Session 9 IRAs–Traditional Deductions and Roth Contributions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMRetirement Planning & Employee Benefits Session 9IRAs–Traditional Deductions and Roth Contributions

  2. Session Details

  3. IRA Statutory Requirements • Eligibility: Compensation (earned income, alimony) and must be under age 70½ (no age limit on Roth IRAs) • Contribution limit: 100% of earned income up to $5,500 (spousal IRAs allowed), $1,000 age 50 catch-up • Contribution deadline: April 15—no extensions • Taxation: Earnings are tax-deferred • Minimum: If an amount greater than $0, but less than $200 is deductible, then a $200 minimum deductible contribution is allowed

  4. IRA Statutory Requirements • Fully vested • No life insurance or collectibles • No loans • RMDs starting at age 70½ (not for Roth IRAs) • 6% penalty tax on excess contributions

  5. IRA Deductibility Active Participant Status An employee is an active participant in a defined contribution plan if, during the taxable year, the employee received any annual additions to his/her account. An employee is an active participant in a defined benefit plan if the employee is eligible to participate in the plan and has not opted out. (Note that investment earnings do not affect active participant status.) Employee Contribution (either voluntary or mandatory) Employer Contribution Forfeiture or or To one of the following plans: • All qualified plans • Tax-sheltered annuity (TSA) under §403(b) • Simplified employee pension (SEP) & SIMPLE plans • Government pension plan

  6. Traditional IRA Deduction Phaseout Amounts (2014)

  7. Calculation of Deductible IRA Contribution • Determine the deductible percentage • Multiply by the maximum contribution amount • The result is the maximum dollar amount that can be deducted (rounded up to the next $10) Example: Single, Modified AGI $66,000

  8. Calculation of Deductible IRA Contribution (1) • Determine the deductible percentage • Multiply by the maximum contribution amount • The result is the maximum dollar amount that can be deducted (rounded up to the next $10) Example: Married/Joint active participant, Modified AGI of $98,316

  9. Calculation of Deductible IRA Contribution (2) • Same as previous scenario, except individual is age 50 or older • .8842 x $6,500 = $5,747.30 • Round up to nearest $10 = $5,750 deductible amount • Balance of $6,500 – $5,750 = $750can be a nondeductible IRA contribution

  10. Roth IRA Contribution 2014 Phaseouts

  11. Multiple Choice Question 1 Allen Baker, a single 40-year-old taxpayer with an AGI of $68,800, is covered by his employer’s profit sharing/401(k) plan. During the plan year, no employer contribution was made and Allen did not make any salary reduction contributions to the 401(k) portion of the plan. Allen’s account balance increased by $120; this was attributable to investment earnings of $80 and forfeitures of $40. If he contributes $5,500 to his IRA, what is the amount of his allowable IRA deduction? • $0 • $200 • $660 • $5,500 

  12. Multiple Choice Question 2 Assume the facts above except that Allen is married, his spouse is not an active participant, they file jointly, and their AGI is $107,000. What is the amount of their IRA deduction? • $0 • $900 • $5,500 • $7,980 • $11,000

  13. Multiple Choice Question 3 Ken and Barbie file jointly. Both work, and their combined AGI is $106,000. This year, Ken’s profit sharing account earned over $5,000, but the company made no contributions and there were no forfeitures. Barbie declined to participate in her company’s defined benefit plan in July because she wants to contribute to and manage her own retirement money. (Her benefit at age 65 under the plan was $240 per month.) How much of their $11,000 contribution can they deduct? • $0 • $5,500 • $8,250 • $11,000

  14. Multiple Choice Question 4 Lucy received a $1,200 profit sharing contribution this year. Lucy and George are married, filing jointly. George is an artist who had no earnings this year. Their combined AGI for this year is $109,000. How much of their $11,000 IRA contribution can they deduct? • $0 • $5,500 • $7,430 • $11,000

  15. Multiple Choice Question 5 Sally and Joe are married, filing jointly. Their combined AGI is $146,000. They are both active participants in their employers’ plans. After making the maximum qualified plan contributions, they wish to make contributions to their Roth IRAs. How much can they contribute to their Roth IRAs? • $0 • $1,000 • $5,500 • $11,000

  16. Multiple Choice Question 6 Jerry’s AGI totals $121,000 this year. He is single. What is the maximum amount he can contribute to his Roth IRA this year? • $0 • $1,000 • $2,940 • $5,500

  17. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMRetirement Planning & Employee Benefits Session 9End of Slides

More Related