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Scenario #2 – A family physician who owns his own practice makes $ 100,000 per year. His maximum contribution is 25% of his post-contribution income ($ 20,000, which would be the same as saying 20% of his gross income) whether he uses a Keogh plan or a SEP-IRA. The cost of maintaining the SEP-IRA is
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The main benefit of a Keogh plan versus other retirement plans is that a Keogh plan has higher contribution limits for some individuals. For 2011, employees can generally contribute up to $ 16,500 per year, and the employer can contribute up to $ 32,500, for a total annual contribution of $ 49,000.
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Scenario #3 – An entrepreneur who owns a small marketing firm makes $ 400,000 per year. She wishes to contribute as much as possible to a retirement plan in order to minimize her current taxes. She could contribute up to $ 11,500 for a SIMPLE IRA, $ 49,000 to a SEP-IRA, or up to $ 50,000
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In a defined-contribution plan, a fixed contribution (percentage of total paycheck or a fixed sum) is made per pay period. It may be set up as a profit-sharing plan, where the pension that one can withdraw after retirement depends on how much they invested in the plan while they worked.
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Scenario #1 – A self-employed accountant makes $ 50,000 per year from her accounting business. Her maximum contribution is 25% of her post-contribution income ($ 10,000, which would be the same as saying 20% of her gross income), regardless of whether she uses a SEP-IRA, Keogh plan, or
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The main benefit of a Keogh plan versus other plans (Keogh's high contribution limit) is lost in individuals who do not make a high level of income. These individuals may get the same benefits of a Keogh plan with less administrative cost by using another type of retirement plan
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Keogh plans cannot be established by an employee. Keogh plans are applicable to self-employed individuals who own their own unincorporated business (sole proprietorships, partnerships and LLCs).
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The total contribution cap is $ 50,000 for 2012, $ 51,000 for 2013, $ 52,000 for 2014, and up to 25% of compensation or $ 53,000 in 2016, whichever is lower.
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The defined-benefits plan is more complex. It relies on an IRS formula to calculate the rate of contributions.
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Penalties may apply for making withdrawals from a Keogh plan before the account holder turns 59½.
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There are two basic types of Keogh plan: defined-benefit, and defined-contribution.
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All contributions must be made "pre-tax", meaning that the contributions can be
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because there are several limitations to Keogh plans.
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Compared to other retirement plans (traditional IRA,
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A person with a Keogh plan can also contribute to an
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In either case, as in other retirement plans such as
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much less, so he would benefit more from that plan.
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250:. There is no such thing as a "Roth Keogh plan".
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125:Eugene J. Keogh, Congressman from New York
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