Life & Health Insurance Exam (National Portion)Taxes, Retirement, and Other Insurance ConceptsHard
A self-employed individual wants to establish a retirement plan that allows for substantial tax-deductible contributions. Which of the following plans would generally allow for the highest contribution limits for a self-employed individual?
- ASIMPLE IRA
- BRoth IRA
- CKeogh (HR-10) Plan
- DTraditional IRA
Show answer & explanationAnswer & explanation
Correct answer: C. Keogh (HR-10) Plan
Keogh (HR-10) plans are designed for self-employed individuals and generally allow for significantly higher tax-deductible contributions than Traditional IRAs, Roth IRAs, or SIMPLE IRAs.
Why the other options are wrong
- A. SIMPLE IRAs have higher limits than Traditional/Roth IRAs but still significantly lower than Keoghs.
- B. Roth IRAs have the same limits as Traditional IRAs and contributions are not tax-deductible.
- D. Traditional IRAs have much lower contribution limits compared to Keogh plans.
Keogh (HR-10) Plan
A qualified retirement plan for self-employed individuals and small businesses, allowing for substantial tax-deductible contributions.
- For self-employed and unincorporated businesses.
- Higher contribution limits than IRAs.
- Can be defined benefit or defined contribution.
- Subject to ERISA rules.
Memory trick: Keogh: King of High Contributions for Owners.