What is a Keogh Plan Retirement Plan
A Keogh plan is 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 defined-contribution plan, although most plans are defined as contributions.
How does a Keogh Plan Benefit You?
The main benefit of a Keogh Plan over other plans is the high contribution limit is lost in individuals who do not make a high level of income. So for lower-wage workers, this can be highly beneficial. These individuals may get the same benefits of a Keogh Plan with less administrative cost by using another type of retirement plan (401(k), SEP-IRA, etc.).
How Do Keogh Plan Withdrawals Work?
Withdrawals from Keogh accounts are taxed as ordinary income and participants in Keogh plans are subject to the same restrictions on withdrawal as IRA’s. Withdrawals cannot be made without a penalty before age 59 ½, and distributions must begin before age 70 ½.
Keogh plans have more administrative burdens and higher upkeep costs than Simplified Employee Pension (SEP) or 401(k) plans, but the contribution limits are higher, making Keogh plans a popular option for many high-income business owners. Because current tax retirement laws do not set apart incorporated and self-employed plan sponsors, the term “Keogh plan” is rarely used. ~ Investopedia
Something to keep in mind, Keogh’s are not an automatic gold IRA vehicle. So you’ll need to check with your custodian. The primary differences between the two plans are contribution limits and individual versus employer contributions. Post-tax contributions can be made to IRA accounts, but Keogh contributions offer higher tax deductions.