If you are an avid financial section reader you may already know the answer to this question, but for most of us the word Keogh has little meaning. With so many more of us working from home, consulting or freelancing on the side, or even starting our own businesses, a Keogh can be very important.
The basic definition of a Keogh is a retirement account designed for self-employed individuals. This type of account works similar to a 401k found in many large companies and can greatly enable business owners and independent contractors to save for their future.
With all the costs inherent in being self-employed and without the offer of a company retirement plan, many self-employed individuals are not adequately saving for retirement. Don’t let this be you. With so many options, like the Keogh account, you should ensure you are protected down the road.
In the case of a Keogh, the main advantage is the tax deferred contributions and earnings, similar to other employee retirement plans. Different than most other IRAs, the Keogh allows you to contribute a portion of your income pre-tax. Then, like other IRAs the earnings will grow tax free until retirement. Therefore there is a double tax benefit with a Keogh account.
Another unique ability of the Keogh is the higher maximum. If you desire to set aside the maximum possible each year towards your retirement, then a Keogh is your best choice. Not only does it allow the largest amount of contributions pre-tax, it also allows you to still contribute to a separate IRA. The specific amounts will vary from year to year and are based on your self-employment income. For the exact specifics you should visit with an investment company or accountant.
The main disadvantage with the Keogh is it does require more paperwork than a standard IRA. But, if you are self-employed, this is certainly a retirement option to seriously consider. If you don’t have a current investment company, you may want to call a reputable organization like T-Rowe Price to find out more.
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*An Overview of Retirement Planning