Business Tax Strategy
Tax · Retirement Plans
Business Retirement Plans —
Shelter $60K-$300K Per Year
Business owners have access to retirement plans most W-2 employees never see — Solo 401(k)s, SEP IRAs, Defined Benefit Plans, Cash Balance Plans. The right plan can shelter $60K-$300K+ per year from current taxes while growing tax-deferred for decades.
Annual contribution limit with combined Solo 401(k) + Defined Benefit Plan
For high-income business owners (40-60+) with steady profits. The defined benefit portion alone can shelter $150K-$280K depending on age and income, and stacks on top of Solo 401(k) contributions.
Plans by business size
Solo 401(k)
Limit: $70,000+ (2025; $77,500 with catch-up at 50+)
Best for: Self-employed or owner-only businesses (and spouse). Most flexible. Roth option. Loans allowed.
Caveat: Must be only employee (spouse OK). No other full-time W-2 employees allowed.
SEP IRA
Limit: 25% of compensation up to $70,000 (2025)
Best for: Solo owners who want simplicity. Easy to set up, easy to administer.
Caveat: If you have employees, you must contribute the SAME percentage for them. Can get expensive fast.
SIMPLE IRA
Limit: $16,500 employee + 3% employer match (2025)
Best for: Small businesses with 1-100 employees. Cheaper than 401(k).
Caveat: Lower limits than a 401(k). Less flexibility on contributions.
Traditional 401(k) with Profit Sharing
Limit: $70,000+ total (2025)
Best for: Businesses with employees. Profit sharing on top of employee deferrals.
Caveat: More admin and compliance. Worth it once you have multiple W-2 employees.
Defined Benefit / Cash Balance Plan
Limit: $150,000-$280,000+ depending on age
Best for: High-income owners (40+) with consistent profits and the goal of catching up retirement savings fast.
Caveat: Higher setup and administration cost. Required to fund each year. Best paired with a 401(k).
The stacking strategy
For maximum shelter, high-income owners often pair a Solo 401(k) (or traditional 401(k)) with a Cash Balance Plan. The 401(k) handles the first $70K. The Cash Balance handles another $100K-$250K on top. Combined contributions of $200K-$350K per year — all tax-deferred — are typical for $500K+ earners over 45.
Build your retirement plan
We'll review your income, employee count, age, and goals — and design the plan combination that shelters the most tax dollars for your situation.
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Sources
Educational content only. Contribution limits indexed annually — verify current limits with your CPA.