Keogh Plans

Self employed businessmen often worry about their tax planning and retirement planning. With the introduction of Keogh plans, the self employed category of people need not worry any further about their future. Keogh plans offer a shelter to people looking for a tax relief on their retirement plans. Numerous lucrative tax benefits are offered by Keoghs plan.

How is Keogh plan different from Individual Retirement Options?

The basic difference between an individual retirement plan and a Keogh plan is the tax saving amount. Keogh allows you to save almost $ 40,000 per year from your net self employment returns or earnings whereas the individual retirement accounts can help you save only $3,000 per year. However, a lot of it depends upon the Keogh plan that you choose.

One another benefit of adopting a Keogh plan is that you can choose another retirement plan (IRA) as well. Forward averaging also applies to Keogh account.

How to open a Keogh plan Account?

Various banks, brokerage houses, credit unions and insurance companies, asset management companies, mutual fund companies are a party to the Keogh Plan Account. You can approach them and take their help in getting a Keogh account for yourself. These institutions charge some fees and commission for providing this service. It is a good idea to do some research before approaching any particular party to open an account. This will help you to get the best deal.

Limit for Opening Keogh Account:

Federal Government has no minimum limit set for opening a Keogh account. However, different financial institutions have their own norms and requirements on the minimum opening balances to be maintained. This limit ranges from around $250 to $1,000.

Necessities and Regulations related with opening a Keogh Account:

•    Deposit Deadline: If you wish to claim a tax deduction for an amount in a particular year, you should open a Keogh account latest by December 31 of that year. However, contribution can be deposited till the time you file for your tax returns (April 15 of the next year). This provides enough time to plan for retirement savings and planning the deposit schedule.
•    Paperwork: Paperwork involves disclosing information about your nature of business, your investment schedule for the account, your business history etc. It will also require you to appoint an administrator for the plan. Accountants can be appointed for this purpose. You will also be required to file disclosure Form 5500 or 5500-EZ on an annual basis.


Keogh plans thus provide a value addition to you in terms of helping you to plan for saving taxes, and thus, offering you a chance to look forward for a comfortable retirement. Little bit of paper work and research is all the effort required from your end.