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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.