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Keogh Plan |
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Keogh plan
Keogh plan. A group of qualified retirement plans, including profit sharing plans, money purchase defined contribution plans, and a defined benefit plan, is available to self-employed people, small-business owners, and partners in companies that file an IRS Schedule K, among others. Together these plans are sometimes described as Keogh plans in honor of Eugene Keogh, a US representative from Brooklyn, NY, who was a force behind their creation in 1963. The employer, not the employee, makes the contributions to Keogh plans, but the employee typically chooses the way the contributions are invested. Like other qualified plans, there are contribution limits, though they are substantially higher than with either 401(k)s or individual retirement plans, and on a par with contribution limits for a simplified employee pension plan (SEP). Any earnings in an employee's account accumulate tax deferred, and withdrawals from the account are taxed at regular income tax rates. If you participate in a Keogh plan, a 10% federal tax penalty applies to withdrawals you take before you turn 59 1/2, and minimum required distributions (MRD) must begin by April 1 of the year following the year that you turn 70 1/2 unless you're still working. In that case, you can postpone MRDs until April 1 of the year following the year you actually retire. The only exception -- and it is more common here than in other retirement plans -- is if you own more than 5% of the company. If you leave your job or retire, you can roll over your account value to an individual retirement account (IRA). If you're eligible to establish a qualified retirement plan, a Keogh may be attractive because there are several ways to structure the plan, you may be able to shelter more money than with other plans by electing the defined benefit alternative, and you have more control in establishing which employees qualify for the plan. But the reporting requirements can be complex, making it wise to have professional help in setting up and administering a plan. Keogh Plan What Does Keogh Plan Mean? A tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or a defined-contribution plan, although most are defined-contribution plans. Contributions are generally tax-deductible. Keogh plan types include moneypurchase plans (used by high-income earners), defined-benefit plans (which have high annual minimums), and profit-sharing plans (which offer annual flexibility based on profits). Also known as HR(10) plans, Keogh plans can invest in the same set of securities as 401(k)s and IRAs, including stocks, bonds, certificates of deposit, and annuities. Investopedia explains Keogh Plan Keogh plans were established through legislation by Congress in 1962 and were spearheaded by Eugene Keogh. As with other qualified retirement accounts, funds can be accessed as early as age 59.5 and withdrawals must begin by age 70.5. Keoghs are known to have more administrative burdens and higher upkeep costs than Simplified Employee Pension (SEP) plans, but the contribution limits are higher, making Keoghs a popular option for many business owners and proprietors. Related Terms: Keogh Plan Under prior law, a Keogh plan was a retirement plan set up for a self-employed taxpayer. The rules that applied to self-employed taxpayers differed from those that applied to common-law employees. Under current law, self-employed individuals are subject to the same rules as common-law employees. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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Priscilla Keogh, president of North Dakota MTA and Katherine Keim, NCTM, immediate past president of Colorado State MTA contributed the following information about their respective state organizations: has named JOHN KEOGH chief executive officer of Ace Overseas General, the company's international property and casualty insurance organization. Also presented was Father Mychal Judge Humanitarian of the Year Award, given n honor of the IABS' late Chair, Gerard Keogh. |
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