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I am about to start working for myself on the side and desire to put the highest percentage of my income into a retirement account. I need to decide between a SEP vs. Keogh plan. My question is how to start a Keogh and is the paper work worth the extra percentage of income I can contribute?

Any suggestions or advice would be greatly appreciated.

Thank you.
Brett
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Greetings, Brett, and welcome. You asked:

<<I am about to start working for myself on the side and desire to put the highest percentage of my income into a retirement account. I need to decide between a SEP vs. Keogh plan. My question is how to start a Keogh and is the paper work worth the extra percentage of income I can contribute?>>

A Keogh is a form of qualified retirement plan that requires a prototype agreement acceptable to the IRS. Those are available at many brokerages, and the costs of implementation will vary. The plan will also require some annual filings with the IRS. You must determine the costs of implementation and administration with the Keogh provider you select, and once you know what they are you can decide for yourself if the added expense and administrative hassle is worth the added contribution you may make in a Keogh versus a SEP.

Regards..Pixy
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A Keogh is a form of qualified retirement plan that requires a prototype agreement acceptable to the IRS. Those are available at many brokerages, and the costs of implementation will vary. The plan will also require some annual filings with the IRS. You must determine the costs of implementation and administration with the Keogh provider you select, and once you know what they are you can decide for yourself if the added expense and administrative hassle is worth the added contribution you may make in a Keogh versus a SEP.

Perhaps you'll find my experience as a sole proprietor with no employees helpful in making these judgements. I've had a Keogh since 1982, although it was 1989 before I learned how to save more money. Opening a Keogh was as easy to opening as an IRA - the forms are longer but no more complex. Once every 5 years or so Congress changes the law a bit, and you get a whole new set of forms to sign - still trivial. Once the assets pass $100,000 you need to file an annual 5500-EZ. This is also simple - a hand full of numbers about how the assets have grown and what new contributions were made. I suspect this gets more complicated in a hurry with employees, but I've never even considered an accountant for my case.

The advantage is that, if you set up both a Profit Sharing Plan and a Money Purchase Plan, you can defer a nominal 25% of your Schedule C profits in a Keogh, versus a nominal 15% in a SEP. The "nominal" means that you must deduct the contribution from Schedule C before calculating the percent, so "nominal 25%" is a real 20% and "nominal 15%" is a real 13+%.
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