Case Study 4:
Solo Practitioner

Maximized deduction yields significant tax deferment.

Vehicles: Defined Benefit Plan and 401(k) Profit Sharing Plan

Challenge: Our client, a professional solo practitioner, earned an annual salary in excess of $700,000 and contributed $61,000 each year to his existing Simplified Employee Pension plan (SEP). However, the client’s accountant believed that the SEP did not provide the client with the greatest possible tax savings.

Solution: JC Actuarial Benefit Consultants, Inc. discussed this challenge with the client and his accountant. From that discussion, we proposed, and ultimately created, a Defined Benefit plan, which would allow the client to make substantial tax-deferred contributions. We also recommended that this plan be augmented by a new 401(k) Profit Sharing plan.

Results: Once implemented, the Defined Benefit / 401(k) Profit Sharing plan solution enabled our client to maximize his annual contribution – in all, nearly $310,000 per year – and in doing so, realize sizable tax savings. This client will now be able to accumulate about $3.5 million in his retirement account by age 62.