• Business
  • Crypto
  • Investing
  • Lifestyle
  • Money
  • Glossary
    • A
    • B
    • C
    • D
    • E
Search
Sign in
Welcome! Log into your account
Forgot your password? Get help
Password recovery
Recover your password
A password will be e-mailed to you.
Finance Reference
Quotes by TradingView
  • Business
    • The Impact of Artificial Intelligence on Social Media Marketing
      What Is The Importance Of Web Design For Your Business?
      3 Factors That Make Your Company Vulnerable to Financial Fraud
      Ways Businesses Can Survive Tough Economic Times
      Product Labeling and Packaging Tips for Businesses
  • Crypto
    • Crypto Market Indexes: Your Ticket to Making Money Through Crypto
      10 Benefits Of Using Crypto Debit Cards
      Everything You Need to Know About Metamask
      Anti-Money Laundering Best Practices for Crypto Firms
      You Should Invest in Bitcoin and Here’s Why
  • Investing
    • Comparing Stock Market Performance vs. Real Estate Investments Through History
      How to Fast Track a Retirement Plan in Your Middle-Age
      How Much of Your IRA Should Be in Precious Metals
      What To Know Prior to Investing in Gold and Silver
      How to Invest in Real Estate: 4 Ways to Help You Get Started
  • Lifestyle
    • How to Choose an Affordable Health Care Plan
      Interesting Facts about Bet9ja
      The Pros and Cons of Anti-Obesity Medication for Weight Loss
      Is It Worth Extending Your Car Warranty? 12/14
      List Of All Vegetables That Dogs Can Eat
  • Money
    • Efficient Funding Opportunities for New and Old Social Businesses
      10 of the Best Funding Sources For Medical Offices In 2023
      Invoice-to-Pay: Automate Your Invoice Payment Cycle
      How To Take Care Of Home Budget During The Winter?
      8 Ways to Improve Your Personal Finances
  • Glossary
    • Overhead Ratio
      What Is an Overhead Ratio?
      Non-Executive Director
      Non-Executive Director: Roles and Responsibilities
      Mothballing
      What is Mothballing & When Should You Do It?
      Night Depository
      What is a Night Depository?
      Pooled Funds
      Exploring the Benefits and Risks of Pooled Funds: A Comprehensive Guide
      AllABCDE
  • Glossary
  • K

Keogh Plan

By
rjonesx
-

Definition

Keogh plans are a type of retirement plan for self-employed people and small businesses in the United States.


Keogh Plan

What is the ‘Keogh 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. Contributions are generally tax deductible up to a certain percentage of annual income with applicable absolute limits in U.S. dollar terms, which can be changed from year to year by the U.S. Internal Revenue Service (IRS).

Explaining ‘Keogh Plan’

Keogh plans represent retirement plans for self-employed people and unincorporated businesses, such as sole proprietorship and partnerships. If an individual is an independent contractor, he cannot set up and use a Keogh plan for retirement.

Qualified Defined-Contribution Plans

Keogh plans can be set up as qualified defined-contribution plans, in which the contributions are made on a regular basis up to a limit. Profit-sharing plans are one of the two types of Keogh plans that allow a business to contribute up to 25% of compensation or $53,000 in 2016. A business does not have to generate profits to set aside money for this type of plan.

Qualified Defined-Benefit Plans

Qualified defined-benefit plans state the annual benefits to be received at retirement, and these benefits are typically based on salary and years of employment. Contributions towards defined-benefit Keogh plans are based on stated benefits and other factors, such as age and expected returns on plan assets. The IRS stated that in 2016, the maximum annual benefit is set at $210,000 or 100% of the employee’s compensation, whichever is lower.

Advantages and Disadvantages of Keogh Plans

Keogh plans were established through legislation by Congress in 1962 and were spearheaded by Rep. Eugene Keogh. As with other qualified retirement accounts, funds can be accessed as early as age 59.5, and withdrawals must begin by age 70.5.

Keogh Plan FAQ

How much can you put in a Keogh plan?

Keogh plans can be set up as qualified defined-contribution plans, in which the contributions are made regularly up to a limit. Profit-sharing plans allow a business to contribute up to 100% of compensation, or $58,000 as of 2021, according to the IRS.

Who is subject to Keogh plan rules?

Any small business owner establishing a Keogh plan for themselves must replicate for any employee that meets the hourly requirements (all employees who have worked for the business for at least two years with a minimum of 1,000 hours a year).

When can you withdraw from a Keogh plan?

At 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. Withdrawing money before age 59½ might make you pay a 10% penalty fee in addition to income taxes on the amount of your withdrawal.

Are contributions to Keogh plan deductible?

Contributions to Keoghs are made pretax, reducing the taxable income of the contributor. Self-employed individuals can deduct the entire yearly Keogh contribution amount, including contributions made on employees’ behalf.

Who Cannot participate in a Keogh plan?

Only a sole proprietorship, a partnership, a limited liability company or a corporation can establish a Keogh plan. An independent contractor/freelance worker cannot set up a Keogh plan, nor can one member of a partnership do so independently.

How is Keogh contribution calculated?

If net business profit multiplied by 0.9235 is $106,800 or less, then the deduction equals 0.5 x (net profit x 0.9235) x 0.153. This yields $7,065. If the net business profit exceeds $106,800, then the deduction equals 0.5 x ((net profit x 0.9235) x 0.029 + $13,243.20).

Further Reading

  • Hierarchical financial needs reflected by household financial asset shares – link.springer.com [PDF]
  • Patterns of household financial asset ownership – digitalcommons.uri.edu [PDF]
  • Property market efficiency: an institutional economics perspective – journals.sagepub.com [PDF]
  • KEOGH retirement plans – mospace.umsystem.edu [PDF]
  • DEFINITION AND MEASUREMENT OF TAX EXPENDITURES: A CASE STUDY OF THE DISABILITY INCOME EXCLUSION AND KEOGH PLAN CONTRIBUTIONS … – elibrary.ru [PDF]
  • Household financial management: The connection between knowledge and behavior – heinonline.org [PDF]
  • Individual account retirement plans: An analysis of the 2007 survey of consumer finances, with market adjustments to June 2009 – papers.ssrn.com [PDF]
  • Estimating the economic impact of pandemic influenza: an application of the computable general equilibrium model to the UK – www.sciencedirect.com [PDF]
Previous articleObligation Bond
Next articleKorea Stock Exchange (KSC) .KS
rjonesx

RELATED ARTICLESMORE FROM AUTHOR

Overhead Ratio

What Is an Overhead Ratio?

Non-Executive Director

Non-Executive Director: Roles and Responsibilities

Mothballing

What is Mothballing & When Should You Do It?

EDITOR PICKS

FAAMG Stocks

Should I invest in additional life coverage?

Per Stirpes vs Per Capita

Obsolete Inventory

Quarter (Q1, Q2, Q3, Q4)

SPX vs SPY: Which is Better for Trading Options on the S&P 500?

Latest

Comparing Stock Market Performance vs. Real Estate Investments Through History

How to Choose an Affordable Health Care Plan

How to Fast Track a Retirement Plan in Your Middle-Age

Efficient Funding Opportunities for New and Old Social Businesses

Interesting Facts about Bet9ja

The Impact of Artificial Intelligence on Social Media Marketing

  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • J
  • K
  • L
  • M
  • N
  • O
  • P
  • Q
  • R
  • S
  • T
  • U
  • V
  • W
  • X
  • Y
  • Z
  • About
  • Accessibility
  • Privacy
  • Sitemap