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Keogh Plans vs. SEP-IRAs

The main reason you might choose to place your money in a Keogh instead of a SIMPLE or simplified employee pension plan (SEP-IRA) is the amount you can save in each plan. The amount you can contribute to a SIMPLE or SEP-IRA is much less than for a Keogh.

Like IRAs, a Keogh lets you grow your savings free of current taxes. You must establish your Keogh plan by the end of the tax year to qualify for tax deductions. Contributions can be made any time until the due date of the employer's tax return, including extensions.

However, setting up a Keogh can be much more complex than setting up a SIMPLE or SEP-IRA.

Neither a Keogh nor SEP plan may lend any part of the fund to an owner or employee. Nor may it buy or sell property from another owner or employee who is in the plan.

In general, Keoghs are used more often than SIMPLEs and SEPs by high-income business owners.

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Keogh Plans vs. SEP-IRAs

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