A Keogh plan is a tax-deferred retirement savings plan for small businesses and self-employed individuals.
A Keogh plan can be thought of as a pension plan that offers small businesses and the self-employed more options than a Traditional IRA, but less administrative paperwork than 401(k) plans. There are two basic forms of Keogh plans, which are called qualified plans. The two plan types are:
Employee and employer contribution limits for Keoghs are much higher than IRAs, and generally align with those of 401(k) and 403(b) plans. Contributions are also not phased out above a certain income threshold as they are with IRAs.
Keogh plans allow the individual to make contributions directly from their gross income on a pre-tax basis. (Income taxes are deferred until the money is withdrawn from the account.) Capital gains and interest earned are also allowed to grow tax-free until withdrawn.