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 ?
If certain conditions are met, a self-employed individual for whose benefit a Keogh plan (see Q 19) is established or maintained (or members of his family) may receive services at reduced or no cost from a bank that bases the eligibility to receive such services upon the account balance of the plan.
Thus, Keogh plans, like all qualified plans, cannot be viewed as a means of avoiding income tax, or passing assets to succeeding generations tax free.
Where an individual has a relatively small amount of self-employment income and the SIMPLE IRA contribution limit is higher than that available for any other form of tax-favored plan, such as a Keogh plan or a SEP.
This may apply in the case of Keogh plans or corporate plans in which only the owners participate (see below).
Self-directed retirement accounts are those that let you decide where to invest your money, such as IRAs and Keogh plans.
Specifically designed for the self-employed, Keogh plans (named after Eugene Keogh, the congressman who came up with the idea) let you put away a good bit of money toward retirement.
He was a pioneer in creating awareness of Individual Retirement Accounts (IRA) and KEOGH plans, transforming them into a commercial product within the reach of the Puerto Rican consumer.
Other kinds of plans offered were Simple IRAs (9%), Simplified Employee Pension IRAs (8%), defined-benefit plans (4%), nonqualified supplemental executive plans (2%) and Keogh plans (1%).
Financial vehicles, such as traditional IRAs, simplified employee pensions (SEPs), savings incentive match plans for employees (SIMPLEs), and Keogh plans, as well as Sec.
Under an exception to the rule requiring periodic payments, distributions from IRAs or Keogh plans maintained by self-employed individuals qualify for the exclusion regardless of whether the distributions are periodic payments or lump-sum distributions.