SOLO DEFINED BENEFIT PENSION PLAN FOR THE
HIGHLY COMPENSATED SELF EMPLOYED
Solo defined-benefit pension plans allow self-employed workers to set aside $100,000 or more a year, substantially more money for retirement than they ever could in a traditional 401(k). (The maximum self-employed workers can save in a defined contribution plan like a SEP Plan or 401(k) is $46,000 in 2007.)
Solo Defined Benefit Pension Plans are aimed at single-worker businesses or those with one to five employees. The plans allow small-business owners and professionals to set aside much larger sums for retirement while shrinking their annual tax burden. The maximum contribution for the 2007 tax year is over $180,000.
The ideal candidate for a Solo Defined Benefit Retirement Plan is a self-employed worker over 50 who expects to have a steady, high income and the ability to contribute at least $60,000 a year for at least three years.
Professionals drawn to a Solo Defined Benefit Pension Plan include; attorneys, doctors, real estate professionals, directors, consultants, speakers, media professionals, professional athletes, architects, dentists, and software developers.
For instance, a doctor or attorney with a small staff and earning $300,000 to $400,000 per year could contribute more than $150,000 per year. As well, someone earning $80,000, for instance, sitting on a board of directors could invest the entire sum in a solo defined-benefit plan. The plans must be opened by Dec. 31 of each tax year.
Such plans aren't for everyone. Individuals who might earn a one-time increase in income in a year wouldn't benefit. For the IRS to be comfortable, you really have to be someone who can contribute to the plan for a minimum of two years. If you would like to learn more about these plans please contact me with any questions.
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