Primerica Life Producer Practice Test

Which of the following is an IRS qualified retirement program for the self-employed?

1. 401(k)

2. Roth IRA

3. Keogh

4. Simplified Employee Pension (SEP)

The correct answer is: Keogh

The Keogh plan, also known as a HR-10 plan, is specifically designed for self-employed individuals and unincorporated businesses, making it an IRS-qualified retirement program tailored for this group. Contributions can be made by both the employer and the employee, which allows self-employed individuals to save more for retirement than some other types of retirement accounts. The contributions to a Keogh plan are tax-deferred, meaning taxes are paid only when money is withdrawn from the account in retirement, providing significant tax benefits. Other options listed, while they are retirement plans, are not specifically designed solely for self-employed individuals. A 401(k) is typically associated with employed individuals through an employer. A Roth IRA allows individuals to contribute post-tax income, but it does not have the same specific application to the self-employed as a Keogh plan does. A Simplified Employee Pension (SEP) is also a plan available for self-employed individuals and small business owners, but it is different from a Keogh in terms of structure and contribution limits. Both the SEP and Roth IRA can appeal to self-employed individuals, but the Keogh plan offers unique advantages and higher contribution limits, tailored specifically for them.