Keogh plans are any type of qualified plan at a sole proprietorship or partnership. Keogh plans come in various forms, and this is because they are actually quite a broad category.
IRS Publication 560 (found here) divides workplace retirement plans into SIMPLE IRAs, SEP IRAs, and Qualified Plans. This last category, Qualified Plans, includes profit-sharing plans, 401(k)s, 403(b)s, money purchase plans, and defined benefit plans such as pensions and salary continuation plans.
Keogh plans, also called HR-10 plans, cover all of the above, when they are used by a sole proprietor or partnership. They have two main types: Defined Contribution and Defined Benefit. Defined Contribution Keogh Plans can either be profit-sharing, money-purchase, or combined.
Profit-sharing Keoghs can incorporate employee deferrals and employer contributions, and packaged as an Individual 401(k). Defined Benefit Keogh Plans are a self-funded pension.
You select an annual pension and then determine how much you will need to contribute in order to reach that goal. An advantage is that you are able to deduct the money you contribute from your income. A 412(e)(3) defined benefit plan, for example, can allow a self-employed person to deduct up to about $210,000 from their annual income to fund their own pension.
Depending on whether you are using a prototype plan from a financial institution, or are building your own plan from scratch, you may end up paying a fair amount for the plan administration and auditing requirements, or not.
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