CHAPTER 10 LIFE INSURANCE

Not tax deductible (Contributions made to a Roth IRA are not tax deductible.)

The self-employed

60 (To avoid tax consequences, a rollover from a Traditional IRA to another IRA must be done within 60 days.)

59 1/2 and owned account for a minimum of 5 years (To be able to make tax-free withdrawals from a Roth IRA, an account owner should be AT LEAST age 59 1/2 and have held the account for at least 5 years.)

Deferred compensation option (A deferred compensation option enables an employee to defer current receipt of income and have it paid at a later date, when presumably the employee will be in a lower income tax bracket.)

Gains (Gains are the taxable portion of the distributions of qualified plans.)

defined contribution plan ( A defined contribution plan is considered a tax-qualified plan.)

Earnings are taxable when withdrawn (Traditional IRA earnings are taxable when withdrawn.)

Qualified retirement annuity

Roth IRA

60

A local electrical supply company with 12 employees

Employee must be able to make unlimited contributions (A qualified plan does not allow the employee to make unlimited contributions.)

It is temporary (A retirement plan will not qualify for favorable tax treatment if it is temporary.)

Stock purchase (Withdrawing funds from a qualified plan for the purpose of purchasing stocks or other securities would trigger a 10% tax penalty.)