What is the primary purpose of a Keogh Plan?

What is the primary purpose of a Keogh Plan?

• A. To provide immediate tax-free income
• B. To assist self-employed individuals with retirement savings
• C. To insure employees against workplace injuries
• D. To offer high-interest savings options

Answer: (B)

The primary purpose of a Keogh Plan is to assist self-employed individuals with retirement savings. This type of retirement plan is specifically designed for self-employed workers and small business owners, enabling them to set aside a portion of their income for retirement in a tax-advantaged way. Contributions made to a Keogh Plan can be tax-deductible, helping to reduce taxable income during the years they are made. Additionally, the funds in a Keogh Plan grow tax-deferred until they are withdrawn during retirement, allowing for compounded growth over the years. This makes it a valuable tool for self-employed individuals looking to secure their financial future after they retire. Other options do not align with the primary function of a Keogh Plan; for instance, providing immediate tax-free income is not a characteristic of this retirement savings plan, and it does not serve as an insurance plan for employees against workplace injuries or as a high-interest savings option.

The primary purpose of a Keogh Plan is to assist self-employed individuals with retirement savings. This type of retirement plan is specifically designed for self-employed workers and small business owners, enabling them to set aside a portion of their income for retirement in a tax-advantaged way. Contributions made to a Keogh Plan can be tax-deductible, helping to reduce taxable income during the years they are made. Additionally, the funds in a Keogh Plan grow tax-deferred until they are withdrawn during retirement, allowing for compounded growth over the years. This makes it a valuable tool for self-employed individuals looking to secure their financial future after they retire.

Other options do not align with the primary function of a Keogh Plan; for instance, providing immediate tax-free income is not a characteristic of this retirement savings plan, and it does not serve as an insurance plan for employees against workplace injuries or as a high-interest savings option.