what is a keogh plan 
 keogh plan is a term used to describe qualified plans that cover the self employed this includes defined benefit plans and defined contribution plans though most plans are set as the latter 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 1understanding the keogh plankeogh plans are the same qualified plans other small businesses can use the defined contribution plan which include profit sharing plans and money purchase plans and the defined benefit plan however the irs calls them keogh plans if they cover a self employed individual 2keogh plans can invest in the same set of securities as 401 k s and iras including stocks bonds certificates of deposit cds and annuities the term comes from u s representative eugene keogh who was instrumental in passing the self employed individuals tax retirement act of 1962 because the act was passed to ensure the self employed had access to retirement plans any plans designed for them became known as keogh plans however the distinction between corporate and other retirement plan sponsors was removed when the economic growth and tax relief reconciliation act of 2001 was passed 3as with other qualified retirement accounts funds in a keogh plan can be accessed as early as age 59 and withdrawals must begin by age 73 4types of keogh planskeogh plans can be set up as qualified defined contribution plans in which the contributions are made on a regular basis up to a limit profit sharing plans are one of the two types of keogh plans that allow a business to contribute up to 66 000 as of 2023 1 a business does not have to generate profits to set aside money for this type of plan money purchase plans are less flexible compared to profit sharing plans and require a business to contribute a fixed percentage of its income every year that is specified in plan documents if a company alters its fixed percentage it may face penalties the contribution limit for 2023 for money purchase plans is set at 25 of annual compensation or 66 000 whichever is lower 1qualified defined benefit plans state the annual benefits to be received at retirement and these benefits are typically based on salary and years of employment contributions towards defined benefit keogh plans are based on stated benefits and other factors such as age and expected returns on plan assets for 2023 the maximum annual benefit is 265 000 or 100 of the employee s compensation whichever is lower 1advantages and disadvantages of keogh planskeogh plans have more administrative burdens and higher upkeep costs than simplified employee pension sep or 401 k plans the key advantage to keogh plans is that they have higher contribution limits making them a popular option for many high income business owners 