Key Differences

Defined benefit plans for high income self-employed individuals, professionals, and small business owners can provide dramatic current year tax savings. Large, tax-deductible contributions to a personal Defined Benefit (DB) retirement plan can increase retirement savings by $1-2.6 million in 5-10 years.

Defined Benefit pension plans are approved by the IRS and work best for:

• Independent contractors, consultants, physicians, real estate agents, and sales reps.
• Employed individuals who also receive self-employment income from a side business, royalties, residuals.
• Owner-only or owner and spouse or family businesses.
• Self-employed spouses of high-income earners.

An individual’s maximum contribution for a defined benefit pension plan is calculated based on age, income and years in the business.  In general, the older the business owner is, the higher the contribution and tax deduction.