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Meowiz asks:

<<NOW, next question:

I have a Keogh acct. which I opened through a Financial planner several years ago. I am not at home, so can't check which I have, but it's either the 10 or 15% one. Since I want to open a second one for the opposite amount, i.e., for a total of 25% between the two, I HAVE to do this by Dec. 31, open it , that is, per the IRS phone agent today. I can contribute up to April 15. I would rather open this second Keogh acct myself, without the financial planner. How can I do that? Same way as you all told me earlier, by contacting something like Vanguard myself on line? Does it have to be totally separate from my other one, which I eventually want to change to control myself, also. >>

First, a Keogh, unlike a SEP, is a qualified retirement plan that requires a prototype document. You already have one set up, so what you are seeking is an amendment to that document to allow you to put in up to 25% of income. Your present provider should be able to handle that. A Keogh can be set up as a profit sharing plan, a money purchase plan, or a combination of the two. With the profit sharing option, contributions are discretionary but can be up to 15% of compensation. With the money purchase option contributions are mandatory (even in years you take a loss), and can range up to 25%. In a combination Keogh, the money purchase is usually set at 10% and the profit sharing at 15%, for a maximum contribution of the lesser of 25% of net self-employed income or $30K per year. That way in bad years you only have to put in the 10%. If you are the only employee, 10% of zero is zero. But if you employ others, you gotta put in their 10%.

So…. You can't set it up yourself, you'll have to use an IRS-approved prototype agreement available through your provider. Just get an amendment to your existing document. And if you want to control the investments, just ensure the available investments include a self-directed option. Again, that's a plan amendment your provider can help you establish.

Keoghs are much more complicated than a SEP or SIMPLE. I bet in retrospect you would rather have the SEP, no?

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