Keogh plan

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Keogh plan

A type of pension account in which taxes are deferred. Available to those who are self-employed.

Keogh Plan

An account into which a self-employed person makes contributions up to a certain limit throughout his/her working life, and from which he/she begins to take distributions following retirement. Under a Keogh plan, contributions are tax deductible and withdrawals are taxed. The limit on annual contributions to a Keogh plan varies each year and is indexed to inflation, but in any case, it is higher than the limit for an IRA or a 401(k). Contributions to Keogh plans are invested in securities and usually own common stock and certificates of deposit.

Keogh plan

A federally approved retirement program that permits self-employed individuals to set aside for savings up to a specified amount. All contributions and income earned by the account are tax deferred until withdrawals are made during retirement. Investment opportunities include certificates of deposit, mutual funds, and self-directed brokerage accounts.

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

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.
References in periodicals archive ?
7 IRAs and Keogh accounts are two types of tax-sheltered accounts that are used to save for retirement.
Quarter-end figures are available for IRA accounts from 1975 to 1980 and from 1964 to 1980 for Keogh accounts.
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The occurrence of IRAs and Keogh accounts at these institutions is also greater than at primary and checking institutions.
The complaint alleges that Prudential Securities, the AEGON defendants, and other financial institutions, breached their fiduciary duties to plaintiffs and the other members of the class or their employers, because it was inherently unsuitable and inappropriate for defendants to permit them to purchase and continue to maintain deferred annuities, which already are tax-deferred, within qualified tax-deferred retirement accounts such as IRAs, rollover IRAs, Keogh accounts and 401(k)s.
The class action is brought on behalf of all persons nationwide who purchased an individual tax-deferred annuity contract or who received a certificate to a group deferred annuity contract, sold by Prudential Securities, the AEGON defendants or certain of the John Doe entities, which was used to fund a contributory (not defined benefit) retirement plan or arrangement qualified for favorable income tax treatment pursuant to Internal Revenue Code, including but not limited to an IRA, rollover IRA, Keogh account or 401(k).
For certain retirement accounts -- including Fidelity's traditional IRA, Roth Conversion IRA, Rollover IRA, SEP-IRA and Keogh accounts -- this minimum will be lowered to $500.
The entities pushing the investments in these scams targeted senior citizens with IRA and/or Keogh accounts.