SEP plans and more

 As the name implies, a SEP is fairly simple in structure and functions solely as a defined-contribution plan. That is, the participant automatically earmarks a percentage of gross income to be paid into a tax-deferred retirement account. 

The Keogh plan is most popular with very high earners, such as physicians who are principals in medical practices and owners of unincorporated small businesses.

It is much more complex than the SEP. 

If you are self-employed or own a small business, and you want to put away more than the individual retirement account (IRA) contribution limit each year, you have a couple of good options. 

Both the Simplified Employee Pension (SEP) plan and the Keogh plan are designed for small business owners and their employees. They are similar in some ways:

• Employees, as well as the business owner, may participate in these plans.
• All participants can deduct the amounts that they contribute from their taxable income each year.
• The money withdrawn after retiring is taxed as ordinary income.
• The account can be opened at just about any bank, brokerage, life insurance carrier, or mutual fund company.
• The money can be invested in any of a wide range of assets including stocks, bonds, mutual funds, and exchange-traded funds.
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