Defined Benefit Plan Design
Deduct $200,000+ Annually While Building Retirement Wealth
Defined Benefit (DB) plans are the most powerful tax-deferred retirement savings vehicle available, allowing contributions far exceeding 401(k) limits. For high-income business owners over 50, annual deductible contributions can exceed $300,000—significantly more than the $69,000 combined 401(k)/profit-sharing limit. The contribution amount is actuarially determined based on your age, income, and retirement benefit target, making this ideal for older professionals seeking accelerated retirement savings.
See Your Potential Savings
Based on a typical client profile for this strategy
Real Results: Client Success Story
"A 55-year-old dental practice owner earning $500,000 annually establishes a defined benefit plan. Based on actuarial calculations targeting a $275,000 annual benefit at age 65, the practice can contribute and deduct approximately $280,000 annually. At a 37% rate, this generates $103,600 in annual tax savings."
*Illustrative scenario for educational purposes. Tax savings depend on individual circumstances, income level, entity structure, and proper implementation. Consult with a tax professional to determine eligibility.
Do You Qualify? Quick Self-Assessment
This strategy may be right for you if:
Check 3 or more? You may be a good candidate for this strategy. Schedule a free consultation to calculate your potential savings.
Investment Levels
- Current situation analysis
- Tax reduction opportunities
- Action item roadmap
- Follow-up summary
- Full financial analysis
- Multi-year projections
- Entity optimization
- Implementation support
- Quarterly planning calls
- Transaction review
- Legislative updates
- Priority access
- Structure analysis
- Document preparation
- IRS filings
- Transition planning
Related Strategies
Explore the Details
For those who want to understand the full picture
Real-World Example: Before & After
A 55-year-old dental practice owner earning $500,000 annually establishes a defined benefit plan. Based on actuarial calculations targeting a $275,000 annual benefit at age 65, the practice can contribute and deduct approximately $280,000 annually. At a 37% rate, this generates $103,600 in annual tax savings.
BEFORE Strategy
AFTER Strategy
The $280,000 deductible contribution dramatically reduces current taxable income. Funds grow tax-deferred until retirement distribution. The contribution level is mandatory once established (minimum funding) but can be designed with flexibility. Plan assets are generally protected from creditors under ERISA.
IRS Authority & Professional References
Key Benefits
- Contribution limits far exceed 401(k)—often $200,000-$350,000+ for older owners
- Immediate tax deduction at highest marginal rates
- Tax-deferred growth on substantial plan assets
- ERISA protection from creditors (in most states)
- Can be combined with 401(k) for additional employee benefits
- Contributions based on age—older owners contribute more
Requirements & Risks
Requirements:
- •Must be established by employer (self-employed qualifies)
- •Annual actuarial certification required
- •Contributions are mandatory—not discretionary like 401(k)
- •Must cover eligible employees (nondiscrimination testing)
- •PBGC premiums required if employees covered
- •Cannot terminate without distributing all assets
Risks to Consider:
- !Mandatory minimum funding even in low-profit years
- !Investment losses may require additional contributions
- !Complex administration—actuary and TPA fees of $3,000-$10,000/year
- !Employee coverage requirements can be costly
- !10-year excise tax on plan termination reversions
- !Less flexible than 401(k) profit-sharing
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