What if you're self-employed and you want to place some of your earnings in a tax-deferred retirement account, but you don't want to limit your contribution to $6,000 in an IRA in 2020 ($6,000 in 2019). You'd like to save considerably more. Do you have the same opportunity available to you as employees who are covered by corporate retirement plans? The answer is yes.

Keoghs allow unincorporated, self-employed business owners (sole proprietors and partnerships) to make tax-deductible contributions and receive the same tax advantages as corporations. Unlike IRAs, Keoghs are still tax-deductible if you're covered by an employer plan. Suppose you work as a part-time freelance writer in addition to your regular, full-time job. You can use your freelance writer income to open a Keogh. A Keogh plan lets you accumulate savings in a private retirement plan that supplements your pension and Social Security.

Opening a Keogh is a bit more complicated than opening an IRA. You must have a plan document that is approved by the IRS. The plan document describes the type of Keogh plan it is and how contributions are determined. You can have either a defined benefit or defined contribution (money purchase or profit-sharing) plan. Your maximum contributions will depend upon the type of plan you establish.

IMPORTANT NOTE: If you are covered by a qualified employer retirement plan, the total annual contributions to defined contribution plans in 2020 cannot exceed 100% of your compensation or $57,000 ($56,000 in 2019), whichever is less. If you also have a defined benefit plan, a separate limitation applies; this benefit limitation of $230,000in 2020 ($225,000 as 2019) is the maximum annual benefit that may be paid from the plan. The actual contribution to a defined benefit plan will depend on the benefit provided under the plan, the participant's age and years of service with the employer, and the rate of return earned on plan assets.