403(b) and Keogh Plans – Series 7 Exam
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
💼 403(b) and Keogh Plans – Series 7 Exam
The Series 7 exam tests your ability to understand and apply retirement plan rules, especially as they relate to tax-qualified plans. Two commonly tested plans are 403(b) plans and Keogh (HR-10) plans — and you’ll need to know how they differ in eligibility, tax treatment, and investment options.
Here’s a clear breakdown to help you master these topics for the exam.
📘 403(b) Plans (Tax-Sheltered Annuities – TSAs)
Who Can Use It?
✅ Public school employees
✅ Non-profit organization employees (501(c)(3))
✅ Certain hospital and church staff
Key Features:
- Tax-deferred growth
- Contributions made via salary reduction (elective deferrals)
- Funded by employee, often with employer match
- Annual contribution limit: Same as 401(k) (indexed; ~$23,000 in 2025)
- Catch-up contributions: Available for those 50+
Permitted Investments:
- Annuity contracts (fixed or variable)
- Mutual funds (only through custodial accounts under 403(b)(7))
❌ No individual stocks or bonds
Tax Treatment:
- Pre-tax contributions
- Distributions taxed as ordinary income
- Subject to required minimum distributions (RMDs) after age 73
- 10% early withdrawal penalty before age 59½ (some exceptions apply)
📘 Keogh Plans (HR-10 Plans)
Who Can Use It?
✅ Self-employed individuals (sole proprietors, partners)
❌ Not for employees of corporations
Key Features:
- Designed for high-income earners
- Can be defined benefit or defined contribution
- Employer contributions only (though individual and matching setups possible)
- Annual contributions based on a % of income (up to ~$69,000 in 2025, indexed)
Permitted Investments:
- Broad selection: stocks, bonds, mutual funds, ETFs, annuities
Tax Treatment:
- Contributions are tax-deductible to the business
- Tax-deferred growth
- Distributions taxed as ordinary income
- Penalties apply for early withdrawal before 59½
⚖️ 403(b) vs. Keogh – Quick Comparison
| Feature | 403(b) Plan | Keogh Plan (HR-10) |
|---|---|---|
| Eligibility | Nonprofit/educational employees | Self-employed individuals |
| Contribution Source | Employee salary deferrals | Employer contributions |
| Investment Options | Annuities and mutual funds | Broad (stocks, bonds, funds, annuities) |
| Max Contribution (2025) | ~$23,000 (+$7,500 catch-up) | Up to ~$69,000 |
| Tax Treatment | Pre-tax, tax-deferred growth | Tax-deferred; employer deductible |
| Early Withdrawal Penalty | 10% before 59½ | 10% before 59½ |
🧠 Series 7 Exam Tips
- Know who qualifies for each plan
- Watch for investment restrictions (403(b) = no stocks directly)
- Understand how contributions are made (salary reduction vs. business deduction)
- Expect scenario-based questions on suitability and tax consequences
- Keogh plans are for self-employed only — don’t confuse with 401(k)s
🚀 Study Retirement Plans with Confidence
Get retirement plan charts, practice questions, and FINRA-tested summaries at:
👉 finra-exam-mastery.com