How Much Can You Save?
Defined Benefit and Cash Balance plans allow clients the largest yearly retirement contributions — averaging $133,000 based on 2015-2017 first year contributions — while saving huge amounts in taxes. Our unique programs are designed for high-income self-employed individuals and businesses with 2 to 10 employees. Depending on the situation, business owners may be able to save over $2.6 million for retirement in just 10 years. The plans’ open architecture allows assets to be invested in mutual funds, bonds, equities, annuities, or any other marketable securities that advisors and clients select.
Maximum Annual Contribution Estimates by Owner Age and Income *
|
Age: |
35 |
40 |
45 |
50 |
55 |
60 |
65 |
|
Income |
Annual Contribution |
||||||
|
$50,000 |
$20,600 |
$25,400 |
$33,800 |
$40,800 |
$49,200 |
$49,900 |
$44,000 |
|
$100,000 |
$41,300 |
$50,900 |
$67,600 |
$81,600 |
$98,500 |
$99,800 |
$88,000 |
|
$150,000 |
$62,000 |
$76,400 |
$101,500 |
$122,400 |
$145,800 |
$149,700 |
$132,000 |
|
$200,000 |
$82,600 |
$101,900 |
$135,300 |
$163,300 |
$197,000 |
$199,600 |
$176,100 |
|
$250,000 |
$95,000 |
$117,200 |
$155,600 |
$187,800 |
$226,600 |
$229,500 |
$220,100 |
| Good Prospects for DB Plan | |||||||
What is a Defined Benefit Plan?
A defined benefit plan is an IRS-approved retirement plan that allows qualifying small business owners to make significant tax-deductible contributions each year. Cash balance plans are a type of defined benefit plan. The contribution amount for these plans is calculated based on a number of factors:
- Current age — the older the client, generally, the larger the allowed contribution
- Years of employment in the business
- Compensation, which can be the average of the client’s 3 highest years
- Planned retirement age — usually at least 5 years from the year the plan is adopted
- A formula that takes into account what percent of compensation the business owner wants to receive as a benefit in retirement and how much of current income they can comfortably afford to contribute to the plan. We work with you to make sure this amount will be appropriate for the next several years.
- And, in subsequent years, the calculation takes into account the accumulated balances in the Trust’s investment account
Plans should be opened by the business’ tax filing deadline including extensions for the plan year.
Choosing the Right Plan for the Business
The best plan for a profitable small business will depend on the number of employees and the owner’s cash flow outlook.
OnePersonPlus is a traditional defined benefit plan best suited for owner-only and family businesses. Business owners contribute $100,000+ on average each year toward retirement wealth which is tax deferred. In certain situations, they can combine this plan with a OnePerson(k) to increase contributions and flexibility.
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OwnersPlus Retirement Program combines a cash balance defined benefit plan with a safe harbor 401(k)/profit sharing plan. The program allows business owners with a few employees to make large deductible contributions for themselves, up to $200,000 or more while controlling the total cost of employee retirement benefits.
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With lower contribution limits than Defined Benefit plans, this plan is a good option for owner-only or family companies that need the flexibility of making optional contributions each year.
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