Types of IRAs

Keough Pension Plans	There are two types of Keough plans, Defined Contribution and Defined Benefit. These contributions are based on a percentage of earned income and are tax deductible. Investment growth is tax deferred until the capital is withdrawn from the account. There can be a combination of these plans, however, the total contributions must not exceed the overall limits for these plans.
	Defined Contribution Plan:	Provides an individual account for each participant in the plan. There are two types of Defined Contribution Plans, a Money Purchase Plan and a Profit Sharing Plan. A Profit Sharing Plan allows you to share your business profits with your employees. This type of Keough Plan allows you to vary contributions from year to year, depending on how well your business is doing. The Money Purchase Plan allows you to contribute as much as 20% of your earnings, up to $30,000. However, with a Money Purchase Plan the contribution is fixed and cannot be changed, regardless of income. The advantage of this plan is it enables the business owner to contribute a greater percentage into the plan.
	Defined Benefit Plan:	This is any type of plan that is not a Defined Contribution Plan. Contributions to this plan are based on a computation to ensure the plan participants are receiving the contributions needed to provide the benefits they deserve. Generally, professional help is needed to determine the contributions that need to be made.
Roth IRA	Unlike a 401(k) or a Traditional IRA, contributions to a Roth IRA are made on an after tax basis, so there is no immediate tax savings. However, there is no tax on the principle or the interest when the money is withdrawn, with few restrictions. The introduction of the Roth IRA added an attractive retirement savings plan. The law still limits the total contributed to an IRA at $2,000 annually (combined if you have both a Traditional and Roth IRA), so this cannot be your sole retirement plan, but it does provide a great start for your retirement fund.
Simple IRA	Savings Incentive Match Plans for Employees (Simple) IRA allows small businesses to establish a simplified retirement plan for their employees. Companies with one hundred or fewer employees, and no other qualified plan, are eligible for the Simple IRA. As with most other IRAs, the employer can make a tax-deductible contribution, and employees are allowed to defer a percentage of their income into the retirement plan. These funds will grow in the Simple IRA on a tax-deferred basis.
Spousal IRA	If your spouse has compensation during the year and each of you is under the age of 70 ½ at the end of the year, then you and your spouse can have regular IRAs. Each of you can contribute up to the $2,000 dollar limit, unless your compensation (or your spouse's) is less than $2000. If your spouse has little or no taxable compensation and you file a joint return, then $2,000 may be contributed to each IRA. Which would allow you to add as much as $4,000 annually to the IRAs.
412(i) Plans	The 412(i) retirement fund is a Defined Benefit Plan, which is ideally suited for the small business owner with six employers or less. The funding requirements fall under the Internal Revenue Code section 412(i), and were created for the purpose of benefiting the small business owner. This plan provides an attractive solution offering a simple alternative with maximum current tax-deductible contributions and guaranteed retirement benefits. This plan may also allow the participant to "cash out" their plan at retirement, where there is one lump sum paid at retirement instead of the monthly payments.

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