What is typically associated with self-employed individuals for retirement plans?

Self-employed individuals often utilize Keogh plans because they are specifically designed to aid self-employed persons and unincorporated businesses in saving for retirement. These plans allow for higher contribution limits compared to other individual retirement accounts, making them an attractive option for those who may have variable income and significant years where they can set aside funds for retirement.

Keogh plans enable self-employed individuals to set aside substantial amounts each year, either as a defined contribution or defined benefit plan, offering flexibility in how retirement savings can be approached. This is particularly beneficial for entrepreneurs and freelancers who may want control over their retirement investment choices and contribution amounts based on their income variability.

While 401(k) plans, pension plans, and traditional IRAs are common retirement options for traditional employees and certain self-employed individuals, they do not provide the specific considerations and advantages that Keogh plans offer for those who are self-employed. Traditional IRAs have lower contribution limits and don’t cater specifically to the unique needs of self-employed workers in the same way. 401(k) plans usually require an employer-employee relationship and are not available to sole proprietors without additional structures, such as an LLC or corporation.