insurance

Keogh Plan Insurance

Life insurance purchased within or alongside a Keogh retirement plan, which is a tax-deferred pension plan available to self-employed individuals and unincorporated businesses. The insurance provides death benefits while the plan offers retirement savings with tax advantages for business owners and their employees.

Example

“The independent consultant established a Keogh plan with insurance components, allowing her to save for retirement while providing life insurance protection for her family.”

Memory Tip

Keogh = Key Owner's Growth - it's a KEY retirement tool for business OWNers seeking GROWTH with insurance protection.

Why It Matters

Keogh plans with insurance components allow self-employed individuals to build retirement savings with tax advantages while maintaining life insurance protection. This combination is especially valuable for business owners who need both retirement planning and insurance coverage but want to maximize tax benefits.

Common Misconception

Many people think Keogh plans are obsolete since newer retirement plans like SEP-IRAs and Solo 401(k)s became available, but Keogh plans still exist and can be beneficial in certain situations. Another misconception is that the insurance component reduces retirement savings, when properly structured policies can actually enhance the overall benefit package.

In Practice

A self-employed architect earning $120,000 annually establishes a Keogh plan contributing $24,000 per year (20% of income) with a $100,000 life insurance component costing $1,200 annually. Over 20 years, assuming 6% growth, the retirement portion grows to approximately $882,000, while the life insurance provides continuous family protection. The total tax deduction over 20 years amounts to $480,000 at a 25% tax rate, saving $120,000 in taxes.

Etymology

Named after Congressman Eugene Keogh, who sponsored the Self-Employed Individuals Tax Retirement Act of 1962, creating these retirement plans for self-employed individuals and small business owners.

Common Misspellings

Keogh Plan InsurenceKeough Plan InsuranceKeogh Plan InsureanceKeyogh Plan Insurance

Related Terms

solo 401k life insurance

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