Keogh Plan

What is the 'Keogh Plan'

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 contribution. Contributions are generally tax deductible up to 25% of annual income with a limit of $47,000 (as of 2007). Keogh plan types include money-purchase 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 an HR(10) plan, Keogh plans can invest in the same set of securities as 401(k)s and IRAs, including stocks, bonds, certificates of deposit and annuities.

BREAKING DOWN '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 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.

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RELATED FAQS
  1. What is the difference between a Keogh and an IRA?

    The Keogh plan, or HR10, is an employer-funded, tax-deferred retirement plan designed for unincorporated businesses or self-employed ... Read Answer >>
  2. I am the beneficiary of an IRA and a Keogh. Can I combine them into one plan?

    It depends. If you are a "spouse beneficiary" for both the Keogh and the IRA, then you may transfer or roll over the inherited ... Read Answer >>
  3. Who bears the investment risk in 401(k) plans?

    Who actually bears the investment risk in a pension plan depends on the type of pension plan that is employed. In a broad ... Read Answer >>
  4. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ... Read Answer >>
  5. How does a defined benefit pension plan differ from a defined contribution plan?

    Learn the differences between defined benefit plans and defined contribution plans when reviewing employer-sponsored qualified ... Read Answer >>
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    Discover how 401(k) plans are privately offered employee retirement plans, while 457 plans are typically available to public ... Read Answer >>
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