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When I approach age 60, should I stop putting money in my Keogh?
Q: I have been putting the maximum amount into my Keogh for many years, and my employer doesn't add to it. There must be a point at a certain age when it is better to bite the bullet, stop investing in a Keogh, and pay the income taxes. When I approach age 60, should I stop putting money in my Keogh?
A: Money placed in a tax-deferred pension plan such as a Keogh is better off being deposited in a taxable account if you plan to withdraw the money within a few years. However, tax-deferred compounding will make a Keogh the preferred investment mechanism over an extended period of time in which life expectancy isn't known and capital gains tax rates may increase. The ability to both use the pension over your entire retirement life and leave the money tax-deferred to another person upon your death, and the fact that contributions to a Keogh plan stop when you retire, makes an absolute age limitation less relevant.