How to Withdraw Funds From a Keogh Plan

by Contributor ; Updated July 27, 2017
Withdraw Funds From a Keogh Plan

How to Withdraw Funds From a Keogh Plan. A Keogh plan can provide self-employed individuals with a great way to save more money for retirement. You must follow specific rules, however, regarding the withdrawal of funds from a Keogh plan. If you do not abide by the rules, you may end up sacrificing a significant portion of the funds that have accumulated in your Keogh plan to early withdrawal penalties.

Step 1

Make sure that you meet the minimum age requirement to withdraw funds from a Keogh retirement plan. If you are not 59 1/2 years old when you begin to withdraw funds from a Keogh plan, you must pay a 10 percent penalty on the amount that you withdraw.

Step 2

Begin making withdrawals from your Keogh retirement plan before you turn 70 1/2 years old. Failing to make the required minimum withdrawals can result in hefty penalties.

Step 3

Determine the maximum amount that you can withdraw from your Keogh retirement plan in a given year. You can withdraw an amount of your choice from a defined-contribution Keogh retirement plan. In the case of defined-benefit Keogh retirement plans, however, there is a maximum amount that you can withdraw each year.

Step 4

Submit a request to your financial planner or plan administrator to withdraw funds from your Keogh plan. If you plan on using the funds from your Keogh plan for expenses in the near future, allow sufficient time for your request to be processed.

Step 5

Pay taxes on the funds that you have withdrawn from your Keogh plan. Though the funds grow tax-deferred while they are invested in the Keogh plan, you must pay taxes on any funds that you withdraw, based on your tax bracket.

Tips

  • If you have a defined-contribution Keogh retirement plan, you may want to meet with a financial planner to determine how much you can withdraw each year based on the number of years you want your retirement funds to last. You may be able to set up an electronic funds transfer to withdraw funds from your Keogh plan more quickly than waiting for a check in the mail.

Warnings

  • Unlike some other types of retirement accounts, Keogh plans do not allow you to withdraw funds for financial hardship if you are self-employed.