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Is a Defined Benefit Plan Right For You?

A Powerful Tool for Qualified Professionals

Defined Benefit plans do not work for everyone. In fact, they are often overlooked as a tax savings and retirement building tool because relatively few individuals are in the right circumstances to use them. For high-income, self-employed professionals and small business owners, however, Defined Benefit plans can deliver a powerful, tax-advantaged strategy for building a large retirement nest egg.

The best candidates for Defined Benefit plans are high-income professionals and small business owners who:

  • Have self-employment income (1099 and/or W-2) from:
    • A sole proprietorship or LLC, or
    • A C-Corp or S-Corp with 0-10 employees, or
    • Have side income from freelance work
  • Are self-employed spouses of high-income earners
  • Are 30 years of age or older
  • Earn at least $100,000 annually
  • Are willing and able to contribute more than $50,000 per year to a DB plan for at least 3 consecutive years, or
  • Would like to contribute a higher percentage of their compensation to a retirement plan than allowed under a 401(k) or SEP-IRA 

Typical professions well suited to Defined Benefit plans include:

  • Actors
  • Architects
  • Attorneys
  • Consultants
  • Dentists
  • Graphic Designers
  • Independent Corporate Directors
  • Independent Insurance Agents
  • Mortgage Brokers
  • Orthodontists
  • Physicians, including locum tenens
  • Real Estate Agents
  • Small Business Owners
  • Software Developers

Cash Balance Defined Benefit Plans: Your Solution If  You Have Employees

Profitable small businesses or partnerships and with 10 or fewer employees can also access the powerful benefits of Defined Benefit plans by combining a Cash Balance Defined Benefit plan with a Safe Harbor 401(k)/Profit Sharing plan.  This combination allows the business owner or partners to make large tax-deductible contributions — potentially $200,000 or more annually — for themselves, while making more limited contributions for employees. 

Key benefits of a Cash Balance plan + 401(k)/Profit Sharing plan include:

  • A flexible structure to meet the needs of a variety of business owners
  • Very large annual tax savings for the owner or owners
  • The 401(k)/profit sharing plan offers a valuable bonus to employees, and at the same time 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
  • To read about a Cash Balance plan in action, visit our Case Studies.

How Much Are Others Saving?

Read our Case Studies showing how DB plans can enable self-employed professionals to save tens of thousands of dollars in tax each year.

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Are You Ready to Get Started?

Find out more about the process of starting a Defined Benefit plan. We walk you through how we work with you to begin your tax and retirement savings

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How Much Can You Save?

With just a few pieces of information, we can provide you with a customized, preliminary proposal to cut your taxes and increase your retirement savings.

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