Keogh plans are retirement savings options for self-employed folks, sole proprietors, partnerships, LLCs, and corporations with self-employment income as of 2026.
What’s a Keogh plan for employees?
A Keogh plan is a tax-deferred retirement account for self-employed people or unincorporated businesses like sole proprietorships, partnerships, and LLCs.
You can set it up as a defined-benefit plan (guaranteed payout later) or a defined-contribution plan (investments grow based on market performance). Most folks use the defined-contribution version—it works a lot like a 401(k), letting you sock away pre-tax dollars that grow tax-free until you withdraw. If you’re self-employed or run a small business, a Keogh can help you save way more for retirement than an IRA ever could.
Who’s eligible to join a Keogh plan?
You’re in if you’re self-employed, a business owner, or an active partner in an unincorporated business who actually works for the company.
That covers sole proprietors filing Schedule C, partners in partnerships, and LLC members taxed as partnerships. Most owners set up Keoghs to stash more cash for retirement than IRAs allow. Just remember: regular employees usually can’t contribute unless the business decides to include them.
Can employees put money into a Keogh?
Employees generally can’t contribute—only the owner or self-employed person can fund the plan.
A Keogh is an employer-sponsored plan, so the business— not the workers—makes the contributions. If you’re an employee at a company with a Keogh, you might be included, but the boss (not you) puts in the money. Current IRS rules don’t allow employee contributions.
Who may contribute to a Keogh plan quizlet?
Only self-employed individuals, business owners, or active partners in unincorporated businesses can contribute—employees can’t.
To qualify, you need self-employment income for the year. If you’re a W-2 employee at a Keogh-sponsoring business, you’re usually included but don’t add your own money. The business handles contributions on behalf of owners or partners.
Is a Keogh plan basically a self-employed 401(k)?
A Keogh is similar to a solo 401(k) but came first and comes with trickier paperwork.
Both let self-employed folks save more than with an IRA. The solo 401(k) wins for ease of setup and maintenance, plus higher contribution limits in some cases. Keoghs can be more complicated, needing formal plan docs and regular filings. For most solo entrepreneurs in 2026, the solo 401(k) is the clear winner for simplicity and flexibility.
Is a Keogh the same as a SEP?
A Keogh isn’t the same as a SEP, though both let self-employed people contribute big bucks.
SEPs are way simpler to run and cheaper to set up, which is why they’re more popular with small businesses. Keoghs can sometimes allow higher contributions but require formal plan documents and IRS filings. Both are qualified plans, but SEPs don’t let employees contribute (except in rare cases), while some Keoghs—like defined-contribution types—do allow salary deferrals under specific conditions.
How much can I put into a Keogh plan?
As of 2026, the max contribution to a defined-contribution Keogh is the lesser of $69,000 or 25% of your compensation.
For defined-benefit Keoghs, the limit depends on the projected annual payout at retirement. Contributions must come from earned income, and the 25% cap applies to your net earnings after business expenses. Money-purchase Keoghs require the same percentage every year—skip a year and you’ll face penalties.
What’s an example of a tax-qualified retirement plan?
Tax-qualified plans include 401(k)s, pensions, Keoghs, and traditional IRAs.
These plans let your money grow tax-deferred, so you don’t owe taxes on gains until you withdraw in retirement. Contributions may also cut your taxable income for the year you make them. Employer plans like 401(k)s and Keoghs have to follow IRS nondiscrimination rules to keep things fair for everyone.
Can I take a loan from my Keogh plan?
Yes—if your plan allows loans and you meet IRS loan rules, you can borrow from your Keogh.
Loans are capped at the lesser of $50,000 or 50% of your vested balance. You’ve got five years to pay it back (longer for home purchases), and you pay interest back into your own account. Not every Keogh allows loans, so check your plan docs. Unlike IRAs (which don’t allow loans), qualified plans like Keoghs and 401(k)s often do.
Is a Keogh the same as a solo 401(k)?
A Keogh isn’t a solo 401(k), though some Keogh types work similarly for solo business owners.
A solo 401(k) is a stripped-down version of a traditional 401(k) for self-employed folks with no employees (except maybe a spouse). It offers high limits, loan options, and easy setup. While a profit-sharing Keogh can feel like a solo 401(k), most owners today pick the solo 401(k) for its flexibility and lighter paperwork.
Can I fund both an IRA and a Keogh in the same year?
Yes—you can contribute to both, but your IRA deductions may shrink if your income is high.
Keoghs are employer plans, so funding one doesn’t block you from also funding an IRA. If your income is too high, though, your traditional IRA contributions might not be fully deductible. Roth IRA contributions? Those are always allowed, though eligibility phases out at higher incomes.
Do Keogh plans have required minimum distributions (RMDs)?
Yep—Keoghs are subject to RMDs starting at age 73 in 2026 under current IRS rules.
RMDs force you to withdraw a minimum amount from tax-deferred accounts once you hit the eligible age. The SECURE Act bumped the RMD age to 73 in 2023 and plans to raise it to 75 in 2033. Miss your RMD and you’ll owe a 25% excise tax on the undrawn amount (down from 50% before SECURE 2.0).
Who’s out of luck with Keogh plans?
Employees under 21, those with less than a year on the job, and part-timers (under 1,000 hours/year) usually can’t join a Keogh.
Keoghs are built for owners and active partners, not short-timers or gig workers. Even full-time employees over 21 aren’t automatically included unless the plan document says so. Independent contractors and freelancers can’t set up a Keogh either—they’re not considered employees of the business.
What makes a retirement plan “qualified”?
A qualified plan is an employer-sponsored plan that meets IRS rules and gets special tax breaks.
To qualify, the plan has to follow IRS rules on nondiscrimination, vesting, funding, and more. Think 401(k)s, pensions, and Keoghs. Contributions and earnings grow tax-deferred, and employers can deduct their contributions as a business expense. These plans must be in writing and approved by the IRS.
What’s true about qualified plans?
Qualified plans get tax perks—contributions and earnings grow tax-deferred until you withdraw.
Employer contributions are deductible as a business expense, and employees don’t owe income tax on contributions or earnings until retirement. The plan must pass IRS muster on coverage, vesting, and distribution rules. It also can’t favor highly paid workers—everyone has to get a fair shake.
Edited and fact-checked by the FixAnswer editorial team.
