Definition of 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 set as defined contribution. Contributions are generally tax-deductible up to a certain percentage of annual income, with applicable absolute limits in U.S. dollar terms, which the Internal Revenue Service (IRS) can change from year to year.
Keogh plans are retirement plans for self-employed people and unincorporated businesses, such as sole proprietorships and partnerships. If an individual is an independent contractor, they cannot set up and use a Keogh plan for retirement.
Self-contributory saving or pension plan for self-employed individuals or employees not covered in their employers pension plans in the US. A tax-deferred scheme, it allows individuals to set aside a certain maximum of their pre-tax income. Similar to the individual retirement account (IRA), Keogh Plan allows the investment earnings to grow without imposition of tax unless money is withdrawn before the individual reaches the age 59½ years. Named after its proposer, the New York Congressman Eugene J. Keogh. Also called self-employed pension.
How to use Keogh plan in a sentence?
- Because current tax retirement laws do not set apart incorporated and self-employed plan sponsors, the term "Keogh plan" is rarely ever used.
- Keogh plans are tax-deferred pension plans—either defined-benefit or defined-contribution—used for retirement purposes by either self-employed individuals or unincorporated businesses, while independent contractors cannot use a Keogh plan.
- Keogh plans have more administrative burdens and higher upkeep costs than Simplified Employee Pension (SEP) or 401(k) plans, but the contribution limits are higher, making Keogh plans a popular option for many high-income business owners.
- Profit-sharing plans are one of the two types of Keogh plans that allow a business to contribute up to 100% of compensation, or $57,000 as of 2020.
Meaning of Keogh plan & Keogh plan Definition