Solo Defined Benefit Plans: Our Favorite Tax Strategy

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All you need to know about solo defined benefit plans and solo cash balance plans.

Solo defined benefit plans in cash balance plans are probably our number one service offering. There are many individual soul proprietors and self-employed business owners that want to maximize their retirement savings while limiting their tax liability.

One of the biggest advantages of solo plans is that you don’t have to worry about employee testing. Because defined benefit plans and cash balance plans have non-discrimination rules just like other retirement structures, there are limitations on what you can contribute while still making sure you contribute for eligible employees.

Assuming the business owner and possibly the spouse are the only employees of the company, it gives you an opportunity to really maximize the funding for the plan. Most business owners are solo owners. That’s typically how a business will start off especially when it comes to people in the professional services like physicians, doctors, CPAs, attorneys, IT professionals, and software engineers.

There are many advantages to solo defined benefit plans and solo cash balance plans. Self-employed people need to realize that they have much larger contribution amounts under these plant structures. When a business owner gets older the contribution amounts will increase substantially and in many situations can be in excess of $300,000 a year.

Plans can also be structured with flexible funding levels where by there is a minimum contribution a target contribution and the maximum contribution. Under this structure there is a lot of flexibility for the solo business owner to be able to make contributions that are in line with their business income for the given year.

Solo business owners come in a variety of different types. There can be soul proprietors who file a schedule C, S Corp. and C Corp. owners whereby they are the only one on W2, and also partnerships for husbands and wives.

Solar define benefit plans and solo cash balance plans work wonderful in most situations. Make sure you reach out to us and we would be glad to chat with you about your situation and run you a fit free illustration. In that case, you can see the true power of these plans and understand the flexible contribution levels.

[lunamorris]

Tons of valuable information, thank you so much. It helped me a lot.

[jaybrown]

I have a solo dbp currently. I am 62 I want to take ss and adjust my w2 accordingly. I have 2 million in retirement and 500k cash. I will use my cash to pay yearly expenses as i plan to reduce my w2. I plan on using the dbp to zero out taxable income that would go to me personally and be earned income which may put me over the max ss benefit allowed before i start losing my ss benefit.