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  Monday November 20, 2017

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KEOGHS VS. SEP-IRAS
Learn even more about this topic with the Encyclopedia of Personal Finance™

The main reason you might choose to place your money into a Keogh instead of a SIMPLE or simplified employee pension plan (SEP-IRA) is the amount you can save in each plan. The amount you can contribute to a SIMPLE or SEP-IRA is much less than that for a Keogh.

Like all IRAs, a Keogh lets you grow your savings free of current taxes. As with a SIMPLE or SEP-IRA, you must open your Keogh fund before December 31 of the plan year to qualify for tax deductions. In both accounts, contributions can be made any time until April 15 of the following year.

However, setting up a Keogh can be much more complex than setting up a SIMPLE or SEP-IRA.

Neither a Keogh nor SEP plan may lend any part of the fund to an owner or employee. Nor may it buy or sell property from another owner or employee who is in the plan.

The other major difference is that Keogh plans are more flexible than SIMPLEs or SEP-IRAs. SIMPLEs and SEPs can be set up only as defined contribution plans, whereas a Keogh can also be set up as a defined benefit plan.

In general, Keoghs are used more often than SIMPLEs and SEPs by high-income business owners.

Now let's take a look at the possible tax benefits you can receive by opening up a Keogh fund.




LEARN EVEN MORE WITH THE ENCYCLOPEDIA OF PERSONAL FINANCE. CLICK HERE!

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