Thursday, January 17, 2013

Keogh Plan

Suppose you own a store or operate a gas station or other small business. Because you are self employed you do not have a company sponsored pension plan and you would like to save more money for retirement than the US $ 2000 per year that you can put into an individual retirement account? What should you do?

The Keogh Plan is one solution. These plans have been available since 1962 when the Self Employed Tax Retirement Act, or the Keogh Act was passed. Keogh Plans are the best means for the self employed to save money on a tax sheltered and tax deferred basis.  The money you put into a Keogh account is deducted from your gross income in the year you make the contribution and the interest your account earns is not taxable untill you begin withdrawing it. By then you will be retired and perhaps in a lower tax bracket.

A Keogh plan has the same purpose and tax status as individual retirement account and you can similar investments with both.  The annual amount you can contribute to a Keogh Plan is much higher than an individual retirement account. 

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