High-Impact Tax Strategy for High Income Individuals

A Retirement Plan That Delivers Huge Tax Savings

A Defined Benefit (DB) plan is an IRS-approved qualified retirement plan that allows small business owners and self-employed professionals to make large annual tax-deductible contributions that can save them tens of thousands of dollars in taxes each year. Over the life of a Defined Benefit plan, a plan owner can potentially cut hundreds of thousands of dollars in taxes while rapidly and tax-efficiently building a multi-million dollar nest egg.

For example, a 52-year old small business owner making $450,000 per year in income can potentially cut his/her tax bill by over $80,000 and save $227,000 for retirement every year.

Why Haven't I Heard of Defined Benefit Plans?

Defined Benefit plans have been around for decades, but in years past they have typically been used by large corporations to fund employee retirement plans. A company would contribute a certain amount each year to a plan during an employee's working years to build up the plan to a point that it would be able to pay a set (defined) benefit to that employee during each year of his/her retirement.

In recent years, DB plans have begun to be used more and more by high-income professionals and small business owners as a powerful tax and retirement savings tool. With our process, a plan owner is essentially both the company (that funds the Defined Benefit plan with tax-deductible contributions) and the ultimate owner and beneficiary of the plan assets in retirement.

DB plans are legal and IRS-approved vehicles, but not many professionals meet the qualifications to use them, therefore not many taxpayers or CPAs are familiar with the details of implementing them.  If you are an independent professional or a small business owner with 10 or fewer employees earning over $100,000 per year, you may be able to take advantage of the benefits of DB plans.  To find out if you qualify, check out our page: Is a Defined Benefit Plan Right For You?


Defined Benefit Plans Offer a Number of Advantages

Larger Contribution Levels. DB plans have the highest allowable, tax-deductible contribution limits of qualified plans - $100,000 or more. This means a DB plan owner could contribute 2 to even 4 times more than he/she could put into a SEP-IRA or 401(k)

  • In this example, a 52-year old earning $300,000 can put over 3x as much in a DB plan alone as she could in a SEP-IRA or 4x as much in DB Plan combined with a 401(k).

Defined Benefit Plan Retirement Plans Tax Savings

Huge Tax Savings. The high contribution levels of DB plans allow plan owners access to larger tax deductions than possible with SEP-IRAs or 401(k)s. These deductions can add up big tax savings - $40,000 or more every year.

  • In this example, a 52-year old freelance consultant with an annual income of $450,000 can potentially cut his/her tax bill by close to $70,000 or over $80,000 in a single year by forming a Defined Benefit plan

Defined benefit retirement plan save on taxes

Rapid Wealth Creation
. The assets you contribute to a DB plan grow tax-deferred. This growth, combined with the higher contribution limits for DB plans, allow you to build a large retirement fund more quickly than you could with other retirement plans.

  • A 50-year old business owner could put $125,000 in a DB plan every year and build a retirement nest egg of $1,000,000 in just 7 years.defined benefit plan retirement plan million dollar nest egg

Easy Rollover: Tax-free rollover to an IRA at retirement (or at plan termination).

Simple Set-up: We walk you through the process from start to finish.

Flexible Investments: We work with you to develop an investment strategy suitable for your circumstances.


Defined Benefit Plans Work Even If You Have Employees

For successful professionals or partnerships and profitable small businesses with 10 or fewer employees, a specific type of DB plan provides an excellent tax savings tool.

A Cash Balance Defined Benefit plan combined with a Safe Harbor 401(k)/Profit Sharing plan allows the owner or owners access to the highest allowable contribution to a qualified plan — $200,000 or more annually — and allows them to capture significant tax savings from the contribution. Some high-income business owners are able to make very large contributions that enable them to slash their current year tax bill by $40,000, $60,000 or even $100,000, depending on their circumstances.  Other key benefits of Cash Balance plans include:

  • A flexible structure to meet the neeeds of a variety of business owners
  • The 401(k)/profit sharing plan offers a valuable bonus to employees, and keeps the required contributions on their behalf limited and controllable. Owners and employees have different contribution rates
  • Investments grow tax-deferred, building more wealth rapidly
  • At retirement (or plan termination), assets can be rolled into an IRA to continue tax-deferred growth 

The following example illustrates a small medical practice with one owner (the physician) and 4 employees.  The physician contributes a significant amount to his own Cash Balance plan and 401(k). He offers those who work for him an employment incentive by making (smaller) contributions on their behalf. With this plan in place, he is able to capture more than $80,000 in tax savings.

Cash Balance plan, small business retirement plan, tax savings


Ready to join other high-income professionals and see how much you can save?

Calculate My Tax Savings


Read more to find out if you qualify to take advantage of a DB Plan?

Is a DB Plan Right For Me?