Keogh plans are a special type of retirement plan designed for sole proprietors, partners, and their employees. Chances are if you file a Schedule C or E (partnership income) for your tax returns, you're eligible for a Keogh.

If you own a business or if you are a partner of a business that is not incorporated, you can open a Keogh. It's not enough to just be an owner, however; you must also perform personal services for the company. If you are a limited or retired partner in a business, a Keogh is not available to you.

If you own more than one unincorporated business, you must open a Keogh for each business. You cannot have a Keogh plan in one business but not the other. If you have a regular job but you also earn self-employment income, you can still save through a Keogh plan.

Self-employed ministers, consultants, and salespersons (who work for outside vendors) are examples of professionals who could open a Keogh. Salaried persons who work for a corporation however, would not be eligible unless they received income from self-employment.

The amount you can contribute to a Keogh depends on your net earnings (compensation) from self-employment, which is generally based on your gross income, minus allowable business deductions.

A Keogh plan allows you to do many things. It allows you to save larger sums of money than under SEP-IRA and SIMPLE retirement plans while providing you with potentially significant tax deductions. It also gives you control over your investment assets. However, if your business has other employees, you will have to include them in your Keogh plan, which could prove costly.