Advantages & Disadvantages
Advantages

  • See Rewards.

  • Pension Reform passed in 2001, which is generally effective 2002, dramatically increases benefits which may be paid from the plan.

  • Recent repeal to IRC regulations 415(e) have simplified the rules for those who are covered by both db and dc pension plans and dramatically increase benefits which may be paid out of the plan.

  • Investment gains generated by plan assets are not subject to federal income tax, until funds are distributed. State taxation is similar, but please consult your tax advisor to clarify the tax rules for your State

  • Plan assets may receive favourable creditor treatment in case of bankruptcy. Consult your attorney, as it depends on ERISA law, bankruptcy law and state law.

  • If you die prior to retirement, your spouse/beneficiary/estate will receive the balance of the assets.

  • A disability pension is allowed, so that you can receive your pension immediately in the case of disability.

  • Individually tailored plan to match personal savings circumstances.

  • Separate account in your own plan's name provides security.

  • If you have no employees, there are no PBGC premiums required. This reduces cost.

  • Ability to choose investment options and service providers to match your risk aversion and comfort level.


Disadvantages
  • See Risks

  • If you are not familiar with the plan, you may be nervous of the unknown.

  • The Keogh db Pension Plan is a complicated financial instrument. It takes some time to become familiar with it. This concern can be lessened by using a professional actuary to take care of your plan, as she/he is specially qualified to meet your retirement needs.

Comparison of Pension Plans
The most important thing is that your Keogh db Pension Plan has potentially MUCH higher tax deductible contribution limits than all other plans. The additional expenses associated with actuarial/legal fees are often small compared to the benefits of the BIG tax refunds. See illustrations. Consult your professional service team.

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