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Here's the situation. I have a regular job as part of a P.C. and have a pension/profit-sharing plan there.

But I also do some consulting work to the tune of about $20,000. As it is now, that "extra" income was on top of my "real work" income and thus taxed heavily.

Because this is consulting work, would a Keogh plan be right for me? As I understand it, I could at least put 20%=$5000 toward a Keough Retirement account, and thus only tax the remaining $15000.

If the answer is "yes," does anyone know how to set up a Keough plan? Do you need a lawyer, 3 financial advisors, a personal assistant and a few notaries, or is it something any Fool could do?

Thanks in advance.
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OK, bad math, bad spelling. Sorry, but the question remains.

Let me add another option:

Keogh or SEP-IRA

Is there an advantage of one over the other in my situation? Does anyone have any references for me?

Thanks again
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deertick Date: 4/20/99 10:36 AM Number: 10045
But I also do some consulting work to the tune of about $20,000.

Because this is consulting work, would a Keogh plan be right for me? As I understand it, I could at least put 20%=$5000 toward a Keough Retirement account, and thus only tax the remaining $15000.


You can put at most 20% of your Schedule C profit into a Keogh. 20%=$4,000, and thus tax on the remaining $16,000.

I use a Profit Share Keogh Plan for 15% (the maximum) and a Money Purchase Keogh Plan for 10% (for the maximum total of 25%). You can go with a straight 25% Money Purchase, but the MP contributions are mandatory while the PS are optional, so my combination gives me maximum flexiblilty. The 25% is "nominal," and results in a real contribution of 20% because it is "25% AFTER the contribution." 25% of (100-20) is 20, so 20% is the real number.

Many of the Discount Brokers and all Banks have forms. It's only modestly more complex than opening an IRA.

Tax Strategies Board FAQ has more information, I think.
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deertick Date: 4/20/99 10:52 AM Number: 10047
Keogh or SEP-IRA

SEP-IRA is a more readily available, is a bit simpler, but limits you to a nominal 15% (really 13+%).

Does anyone have any references for me?
Tax Strategies board FAQ, about Qualified Plans.
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SEP-IRA is a more readily available, is a bit simpler, but limits you to a nominal 15% (really 13+%).

Not necessarily. If you are the sole employee of your own S-corp, you are not considered to be self-employed, and can contribute 15%.

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Greetings, Deertick, and welcome. You asked:

<<Here's the situation. I have a regular job as part of a P.C. and have a pension/profit-sharing plan there.

But I also do some consulting work to the tune of about $20,000. As it is now, that "extra" income was on top of my "real work" income and thus taxed heavily.

Because this is consulting work, would a Keogh plan be right for me? As I understand it, I could at least put 20%=$5000 toward a Keough Retirement account, and thus only tax the remaining $15000.

If the answer is "yes," does anyone know how to set up a Keough plan? Do you need a lawyer, 3 financial advisors, a personal assistant and a few notaries, or is it something any Fool could do?>>


You may use a SEP, Keogh or SIMPLE for your consulting work. For a brief overview of each, see my Foolish Retirement Plan Primer at http://www.fool.com/retirement. You should also go to the IRS website at www.irs.gov and download IRS Publication 560, Retirement Plans for Small Business (SEP, Keogh and SIMPLE Plans). There are any number of providers who can help you establish one of these beasties.

Regards..Pixy
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Keep in mind that your contributions to your pension plan at your day job also come into play. The combination of contributions to multiple retirement plans cannot exceed the annual limit on contributions. This factor may constitute a greater limitation on your contributions than the specific limitations within any particular plan.
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