The Royce CPA Firm

Certified Public Accountant specializing in personal, non-profit and forensic accounting and tax preparation

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High Income? Here’s a Little-Known Way to Supercharge Your Retirement & Cut Taxes

If you’re a solo business owner with strong, consistent income—and you’ve been maxing out your retirement plans—you might be wondering: What else can I do to lower my taxes and build wealth faster?

There’s one option most business owners overlook: the Defined Benefit Plan (sometimes called a Pension Plan).

What Is a Defined Benefit Plan?

Defined benefit plans are often associated with big companies or government jobs. But they can also be powerful tools for high-income self-employed professionals, especially those in their 50s or early 60s who are looking to make up for lost time on retirement savings.

Unlike SEP IRAs or solo 401(k)s, which cap how much you can contribute each year, a defined benefit plan allows for much higher contributions, calculated based on your retirement goal and timeline.

Is This a Fit for You?

This strategy works best for business owners who are:

  • Age 50 or older
  • Earning steady, high income
  • Wanting to contribute more than $70,000 per year
  • Comfortable committing to multi-year contributions

Example:
A business owner earning $1 million per year may be able to contribute $300,000 annually, potentially saving over $120,000 in taxes each year.

How It Works

An actuary helps determine how much you’re allowed to contribute based on your:

  • Age
  • Compensation
  • Retirement timeline

For 2025, the IRS allows:

  • Funding up to $280,000 per year in retirement benefits
  • Accumulating up to $3.5 million in your plan
  • Contributions based on income up to $350,000

That’s significantly more than any other retirement vehicle available to small business owners.

What to Know Before You Dive In

Defined benefit plans come with some complexity, so they’re not for everyone. Here are a few things to consider:

Setup & annual administration costs: Expect to invest $1,000 to $4,000 per year for actuarial support and compliance filings

Commitment: These plans are long-term; you’ll need to contribute for several years to make them worthwhile

Withdrawal restrictions: Money is generally locked in until retirement age, and early withdrawals come with penalties

But for the right person, the tax savings and retirement growth can be substantial.

Let’s Explore Whether It Makes Sense for You

If your income is strong and stable, and you’re ready to make a serious investment in your financial future, this could be the strategy that gets you to the next level.

Give us a call and we’ll walk through the numbers together. We’ll help you decide if a defined benefit plan fits your goals—and if so, how to make the most of it.