Retirement options.

Full-time and part-time self-employed people can enjoy the double benefits of reducing their current income taxes while saving for retirement. Both goals can be reached by contributing each year to a Keogh plan or a Simplified Employee Pension.

Annual contributions to Keogh plans and SEPs are tax-deductible and are not taxed as current income to participants. As an added bonus, the earnings and gains on these contributions are tax deferred as they grow over time.

Keogh plans are retirement plans for people who are self-employed (either full- or part-time) and partnerships. A Keogh plan allows you to shelter part of your self employed income tax-free until you retire. If you are a sole proprietor, you can deduct contributions as well as contributions for eligible employees. Several kinds of Keogh plans are available, all offering tax-deferred shelter for your retirement savings.

* Money-purchaseplans allow you to save as much as 20 percent of your annual self-employment income, up to a maximum of $30,000. However, once you open this plan you must contribute the same percentage of your income each year, or face tax penalties.

* Profit-sharing plans let you put up to 13.0435 percent of your income (up to

the $30,000 limit) but you can vary the percentage of contributions each year--or choose not to contribute anything.

* Defined-benefit plans provide you and your employees with a definite benefit

at retirement. For example, a plan that guarantees a monthly benefit of 20 percent of compensation upon reaching age 65 would be considered a defined benefit plan. Contributions to the plan are required and are based on the benefits to be provided. This plan is best suited for older self-employed people (usually 50 and older) who can afford to make each year's required contributions. This type of plan may not be for you if you require contribution flexibility.

Another retirement plan option for those who are self-employed is the Simplified Employee Pension Plan, or SEP. A SEP allows you to make profit-sharing like contributions to your own IRA and to the IRAs of your employees without getting involved in the more complex Keogh plan.

You may contribute up to 15 percent of an eligible employee's annual compensation (or for you, 13.0435 percent)--up to a maximum of $30,000--to a SEP

plan on a tax-deferred basis until withdrawal.

An added tax benefit of a SEP is that it is the only employer-funded retirement plan that can be established after the end of the current tax year. For example, you can start a SEP for your 1993 fiscal year at any time through April 15, 1994 (including tax filing extensions). As a small business owner, this can be extremely helpful to you if you need to offset a large, non-recurring income gain with a SEP tax deduction.

Owners of companies with 25 employees or less should consider a SEP variation called the Salary Reduction Simplified Employee Pension (SARSEP). Similar to SEP, this simplified alternative to a 401(k) plan is funded by employees on a pre-tax basis (5O percent of eligible employees must agree to participate). For 1993, salary reductions are limited to 15 percent of compensation up to $8,994; however, this limit is indexed for inflation and will increase annually with the cost of living.

If you are a small business owner, SARSEPs provide an inexpensive way to offer retirement benefits to your employees, while saving for your own retirement. You can even make profit-sharing-like contributions.

Clearly, Keogh plans, SEPs and SARSEPs offer "big company" retirement benefits to the self-employed and their employees of even the smallest businesses. If you would like details on how to start saving for retirement while reducing current taxes through one of these plans, call your financial advisor today.