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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Opening a Keogh acct Date: 12/10/1998 4:02 PM
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First of all, I got it from the HORSE'S MOUTH (the IRS) that yes, JABoa, Pixy and Jo? were correct about not needing to open Roth or other IRA till April if it is not conversion Roth. So, since I already did my penance for challenging JABoa, by eating my (polartec) hat (8 [~ , I have no need to feel like the other end of the horse! Thank you all for pointing the horse in the right direction!

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. Thanks.

meowhinnnnying

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7172 of 74759
Subject: Re: Opening a Keogh acct Date: 12/10/1998 5:11 PM
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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?

Regards….Pixy


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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7175 of 74759
Subject: Re: Opening a Keogh acct Date: 12/10/1998 6:18 PM
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Keoghs are much more complicated than a SEP or SIMPLE. I bet in
retrospect you would rather have the SEP, no?


Pixy! Many thanks for your detailed and thoughtful response. I'm printing it to use.

I sense from your question above that you might be having a dream-like thought that I know the difference between the SEP and Keogh. I don't, unfortunately. I think you can contribute the most with a Keogh though, at least in my situation? Self-employed. The Keogh I have has done exceptionally well in returns over the two years or so I've had it. So it's fine with me to keep it with same financial planner, till I know how to do any better myself. Thank you again for your time and wisdom! meowiz

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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7176 of 74759
Subject: Re: Opening a Keogh acct Date: 12/10/1998 6:30 PM
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Pixy, oh I get it, you mean SEP is easier because I don't need a prototype form, I guess. I think I originally picked Keogh because of higher contribution possiblity?

meowiz

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7189 of 74759
Subject: Re: Opening a Keogh acct Date: 12/11/1998 9:40 AM
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Meowiz sez:

<<I sense from your question above that you might be having a dream-like thought that I know the difference between the SEP and Keogh. I don't, unfortunately. I think you can contribute the most with a Keogh though, at least in my situation? Self-employed. The Keogh I have has done exceptionally well in returns over the two years or so I've had it. So it's fine with me to keep it with same financial planner, till I know how to do any better myself.>>

Well, gee. Now my feelings are hurt. I would have thought that by now you had already read my Foolish Retirement Plan Primer available at http://www.fool.com/Retirement/Retirement.htm in which I describe the SEP and Keogh. After all, I wrote it just for folks like you. :-)

Regards….Pixy


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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7190 of 74759
Subject: Re: Opening a Keogh acct Date: 12/11/1998 9:40 AM
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Meowiz sez:

<<Pixy, oh I get it, you mean SEP is easier because I don't need a prototype form, I guess. I think I originally picked Keogh because of higher contribution possiblity?>>

Yep, it's far simpler to establish and administer. However, And, the Keogh does allow a potentially larger contribution. It's biggest drawback is that it's a formal plan with a hunk more administrative requirements and costs attached. It's a good tool, but more complicated.

Regards….Pixy



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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7202 of 74759
Subject: Re: Opening a Keogh acct Date: 12/11/1998 12:49 PM
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Well, gee. Now my feelings are hurt. I would have thought that by now you
had already read my Foolish Retirement Plan Primer available at
http://www.fool.com/Retirement/Retirement.htm in which I describe the
SEP and Keogh. After all, I wrote it just for folks like you. :-)


Pixy, I have read your well-written primer, several times and have it printed out, in a binder. When I typed that response to you, I was in a hurry and didn't have time to reread it. I only remembered that when I chose Keogh, it seemed like best thing, and when I read your info, I still thought it was best for me since it allowed max. potential contribution. I do appreciate the work you do here to help people like me! Thanks! meowiz

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