A Retirement Plan That Delivers Huge Tax Savings
A Defined Benefit (DB) plan is an IRS-approved qualified retirement plan that allows small business owners and self-employed professionals, like locum tenens physicians, to make large annual tax-deductible contributions that can save them tens of thousands of dollars in taxes each year. Over the life of a Defined Benefit plan, a plan owner can potentially defer hundreds of thousands of dollars in taxes while rapidly and tax-efficiently building a multi-million dollar nest egg.
The chart illustrates how a 50-year-old locum tenens physician earning $350,000 per year could potentially cut his taxes almost $50,000 per year with a Defined Benefit plan or over $75,000 per year by combining a Defined Benefit plan with a 401(k). In both cases, he is also saving almost $200,000 or more for retirement.
Why Do Defined Benefit Plans Work So Well For Locum Tenens?
Locum tenens physicians are ideal candidates for DB plans because they typically:
- Are independent contractors with few or no employees
- Earn a high income
- Pay a high tax rate on their income
- Have few expenses and little to no overhead, and therefore have few available tax deductions
A DB plan can also be combined with an Individual 401(k) plan to maximize tax savings and to add year-to-year flexibility to the overall plan contribution amount. Many locums whose annual income fluctuates significantly appreciate this flexibility.
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Defined Benefit Plans Offer a Number of Advantages
Highest Potential Contributions. DB plans have the highest allowable, tax-deductible contribution limits of qualified plans. Contributions vary based on a variety of factors, including owner's age and income, but they can be as high as $100,000 per year or more. Professionals in the right situation can combine a DB plan with a 401(k), making even larger, tax-deductible contributions, and further boosting retirement savings.
- In this example, a 50-year old locums making $350,000 per year could invest three to almost four times as much in a DB plan or a DB Plan with a 401(k) than he could with his 401(k) alone.
Huge Tax Savings. The high contribution levels of DB plans allow plan owners access to larger tax deductions than possible with SEP-IRAs or 401(k)s. These deductions can add up to big tax savings - $40,000 or more every year.
- In this example a 50-year old locum tenens physician with an annual income of $350,000 can potentially cut his tax bill by $60,000 or over $70,000 in a single year by forming a Defined Benefit plan.
Rapid Wealth Creation. The assets you contribute to a DB plan grow tax-deferred. This growth, combined with the higher contribution limits for DB plans, allow you to build a large retirement fund more quickly than you could with other retirement plans.
- If the same locums physician puts $190,000 in a Defined Benefit plan every year for ten years, his retirement savings could potentially grow to over $1.7M in 10 years.
Easy Rollover: Tax-free rollover to an IRA at retirement (or at plan termination).
Simple Set-up: We walk you through the process from start to finish.
Flexible Investments: We work with you to develop an investment strategy suitable for your circumstances.