What benefit does a Keogh Plan provide specifically for self-employed individuals?

A Keogh Plan provides a significant benefit for self-employed individuals by serving as a federally-approved, tax-deferred savings program. This allows self-employed people to set aside a portion of their income for retirement while deferring taxes on that income until it is withdrawn, typically in retirement.

This tax-deferred structure means that contributions to the Keogh Plan reduce the participant's taxable income for the year, ultimately lowering their current tax burden. Additionally, the investment earnings within the Keogh Plan grow tax-free until distribution, which can contribute to a larger retirement fund over time.

The plan is specifically designed to accommodate the unique financial situations of self-employed individuals and offers higher contribution limits than traditional IRAs, making it an effective tool for retirement savings. This emphasizes the importance of proactive retirement planning, especially for those who do not have access to employer-sponsored retirement plans.