Defined Benefit Plan

A great way to save money in taxes is by contributing to a retirement plan. Assuming a 40% tax bracket, for every $10,000 that an individual places into a retirement account leads to a saving of about $4,000 in taxes. Let’s explore the idea of how a Defined Benefit Plan works- a 52 year old self employed physician can put away about a $193,000 in a Defined Benefit Plan, and it is completely tax deductible (Defined Benefit Contribution Amount Provided By Advanced Pensions Solutions Inc. in 2013). Assuming again a 40% tax bracket this would mean a tax saving of about $77,000 a year and over a 10 year period we’re looking at a tax saving of about $773,000. Every individual’s situation is unique but it is very important to contribute to some type of retirement plan to maximize tax savings.

The figures in this page are hypothetical, are provided for illustrative purposes only, and do not reflect the performance of an actual investment.