Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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For a Keogh Plan, what is the maximum annual contribution allowed?

$30,000
$50,000
$25,000
$10,000

The correct answer is: $50,000

The maximum annual contribution allowed for a Keogh Plan, which is a type of retirement plan specifically designed for self-employed individuals and unincorporated businesses, is based on the self-employed person's net earnings from the business. As of the information available up to 2023, the contribution limit for a Keogh Plan for tax purposes is determined by a percentage of the net earnings. Typically, individuals can contribute the lesser of 25% of their net earnings or a set dollar amount, which can increase periodically with cost-of-living adjustments. In recent years, especially before the latest adjustments took place, this amount was set at $50,000 per year for those under the age of 50. This higher limit allows for more significant retirement savings opportunities for self-employed individuals, in contrast to traditional IRAs or other retirement plans that might have lower contribution caps. Thus, the choice that reflects the correct and maximum contribution limit for a Keogh Plan aligns with the established parameters for retirement savings and tax-deferred growth opportunities available to self-employed individuals and business owners.