Five-year Averaging
Definition Income averaging strategy used to determine taxes on a lump-sum distribution as if the distribution occurred over a five-year period, resulting in a reduction
401K
A tax-deferred employer-provided retirement savings account, to which eligible employees may defer part of their salary. Salary deferral can be pre-tax or post-tax include Roth 401(k)s.
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Fair Market Value (FMV)
Definition The market value of a retirement account as of a particular date. In general, the fair market value of a plan’s assets is the
ERTA (Economic Recovery Tax Act of 1981)
Definition ERTA changed the laws to allow participants covered by employer-sponsored plans to make participant contributions to IRAs. Prior to ERTA, only individuals not covered
EGTRRA (Economic Growth and Tax Relief Reconciliation Act of 2001)
Definition Act signed into law by President George W. Bush on June 7, 2001, which made extensive changes to retirement plans. Changes made by EGTRRA
Economic Recovery Tax Act of 1981 (ERTA)
Definition ERTA changed the laws to allow participants covered by employer-sponsored plans to make participant contributions to IRAs. Prior to ERTA, only individuals not covered
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
Definition Act signed into law by President George W. Bush on June 7, 2001, which made extensive changes to retirement plans. Changes made by EGTRRA
Early Withdrawal Penalty
Definition A penalty that applies to certificates of deposit (CD)s ( or time deposits) from which withdrawals are made before the maturity date. The penalty
Early Withdrawal
Definition Withdrawal that occurs from a certificate of deposit (CD) before the maturity date. An early withdrawal penalty is usually applied to CDs from which early withdrawals
Early distribution penalty exceptions
Definition A condition under which the early distribution penalty is waived. Some exceptions apply to IRAs only, some apply to qualified plans , 457(b) and
Early distribution Penalty
Definition Distributions that occur before the retirement account owner reaches age 59 ½ are subject to an early distribution penalty (or excise tax) of 10%,
