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 by self-employed individuals and those who work for them. Contributions to Keogh plans can be made with pre-tax dollars, subject to annual contribution limits.
Small businesses, partnerships, limited liability companies (LLCs), and sole proprietorships are eligible to establish Keogh plans. Independent contractors cannot use a Keogh plan.
A Keogh plan can be set up as either a defined-benefit plan or a defined-contribution plan, though most plans are set as the latter.
A Keogh plan is a retirement plan that allows self-employed individuals up to $61,000 per year in tax-deductible contributions. Plan limits are set by the IRS and can change annually.
In addition to income taxes on withdrawals, any Keogh plan distributions taken before age 59½ are subject to a 10% early distribution penalty.