CTC Retirement & Deferred Compensation Flashcards

What is the 2024 annual contribution limit for a solo 401(k) employee elective deferral (under age 50)?

Answer: $23,000

For 2024, the employee elective deferral limit for a 401(k) plan is $23,000, an increase from $22,500 in 2023.

A Defined Benefit (DB) pension plan is most advantageous for a high-income business owner who is:

Answer: Older with fewer years to fund the plan

Defined benefit plans require funding a promised future benefit; older owners need to fund that benefit over fewer years, requiring larger annual deductible contributions.

Under a SIMPLE IRA plan, what is the employer matching contribution requirement?

Answer: Up to 3% of employee compensation (matching) or 2% non-elective

Employers sponsoring a SIMPLE IRA must either match employee contributions dollar-for-dollar up to 3% of compensation or make a 2% non-elective contribution for all eligible employees.

Which retirement plan type requires no employer contribution in years when cash flow is tight, offering maximum flexibility?

Answer: SEP-IRA

A SEP-IRA allows employers to vary their contributions from year to year, including making no contribution at all in difficult financial years, providing maximum cash-flow flexibility.

The Required Minimum Distribution (RMD) starting age for individuals who turn 73 in 2023 or later is:

Answer: 73

SECURE 2.0 Act increased the RMD starting age to 73 for individuals who turn 73 in 2023 or later, with a further increase to 75 scheduled for those born in 1960 or later.

A tax-free Roth conversion strategy is most beneficial when a client's current tax rate is:

Answer: Lower than their expected future rate

Converting pre-tax retirement funds to Roth makes the most sense when the client's current marginal rate is lower than the rate expected at distribution, minimizing the overall tax cost.