Withdrawal rules for Keoghs will be essentially the same as rules for IRAs and 401(k)s. Once you are age 59½, you may begin to make penalty-free withdrawals and only pay income taxes on the amount you withdraw, similar to a traditional IRA. If you decide to withdraw money before age 59½, you may have to pay a 10% penalty fee in addition to income taxes on the amount of your withdrawal.

Of course, there are exceptions. One exception for most qualified plans is for employees who separate from service at or after age 55: this is the early retirement exception, and the 10% penalty will not apply. Keoghs will technically use the early withdrawal rules for 401(k)s and not IRAs, which differ slightly.

Once you turn 70½, you must begin to withdraw minimum amounts each year known as RMDs (Required Minimum Distributions), which are determined by the IRS using age-based factors. You do not have to take RMDs if you are still working at the company. The defined benefit and money purchase Keoghs out there may have different withdrawal rules.

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