Maryland Life and Health Insurance License Practice Exam

Keogh plans were designed primarily for whom?

1. Employees of corporations

2. The self-employed

3. Non-profit organizations

4. Independent contractors

The correct answer is: The self-employed

Keogh plans, also known as HR10 plans, were specifically designed for self-employed individuals. These retirement plans allow self-employed persons to set aside a portion of their income for retirement while also providing them with tax advantages. Because self-employed individuals do not typically have access to employer-sponsored retirement plans, Keogh plans create a means for them to save for their future in a structured way, similar to how employees of corporations can benefit from their employer’s retirement offerings. The self-employed nature of the individuals eligible for Keogh plans is key to understanding their structure and benefits. These plans can provide higher contribution limits than traditional IRAs, making them an attractive option for individuals running their own businesses or freelancing. Consequently, Keogh plans facilitate the retirement savings of those who, due to their self-employed status, might not have other retirement savings avenues available to them.