deferred growth. However, unlike the IRA, Keoghs allow for contributions far in excess of two thousand dollars a year. For people like Cathy and me, that increased al-lowable-contribution level is vital to our retirement planning.
"How much you can contribute to a Keogh plan is de-pendent upon the type of plan you choose. The majority of us select a defined-contribution plan. Your retirement benefits in this type of plan will be dependent upon the amounts you have contributed over the years and how well you have invested the funds.
"There are two types of defined-contribution plans. The first is a money-purchase plan to which, quite simply, you contribute based on a fixed percentage of your income and your employees' income."
"Your employees' income?" Cathy repeated.
"Yes, Cathy, that is one negative associated with setting up a Keogh plan. Generally, you must include your full-time employees who fall within certain parameters in your plan. So, you must contribute to their retirement accounts. Of course, your contributions to their accounts are deductible. Even so, the cost of including these employees may eliminate your personal tax savings for your own contributions. Increased goodwill will have, I'm sure, a balancing effect, but you can't take goodwill to the bank. Weigh such a situation carefully."
"None of us has any employees. Not even Cathy," I remarked.
"That makes it easy," Roy acknowledged. "Now back to money-purchase plans. You are allowed to contribute twenty-five percent of your earned income or thirty thou-sand dollars, whichever is less. Mind you, that statement is