As benefits are paid out, they are withdrawn from a common fund. For instance, retirees often lower their expected rate of return to reflect their more conservative nature and utilize investment choices such as bonds and insurance contracts. With a defined contribution plan, employers often make tax-deductible contributions to employee accounts. Simplified Employee Pensions Simplified Employee Pensions, or SEPs, allow employers with 25 or fewer employees to establish retirement savings accounts for each employee, authorizing tax-deductible contributions to an employee's account. If you are self-employed, you might refer to your profit sharing plan as a Keogh plan.
Special limits apply to self-employed business owners.
Contributions are generally tax-free until distributed. Keogh plans can be either defined benefit or defined contribution types. For defined contribution plans, money purchase pension plans and profit-sharing plans are available. A money purchase plan is an employer sponsored retirement plan that requires a specified employer contribution. If you are self-employed, you might refer to your money purchase pension plan as a Keogh plan.