A defined-benefit plan is more complicated but permits you to contribute whatever will be necessary to meet your retirement payout schedule. You decide what securities to buy and sell, and when. Withdrawals can begin at age 59 and must begin by age 70 . Early withdrawals are penalized at 10 percent, except in cases of serious illness, disability or death. SEP plans are similar to a defined-contribution Keogh plan but are easier to establish.
Contributions are tax-deferred until withdrawn.
There is a little more paperwork involved in maintaining a SEP or Keogh, including filing an annual tax return for a Keogh, but the savings justifies the effort. Conclusion Many self-employed individuals aren't aware of income tax savings available to them. This tax tip explains several strategies for minimizing taxes. Hiring your children allows you to shift income to a lower tax bracket and can help you avoid some payroll taxes. Establishing a medical plan for your business lets you deduct personal medical expenses.