Lighthouse Consultants
Sep 22, 2026
Maxing out a 401(k) does not always mean you have reached your retirement savings limit.
Many business owners already use a 401(k). But for certain profitable business owners, adding a Defined Benefit Plan, or DB Plan, can create additional retirement savings and tax planning opportunities.
401(k) Limits
Employee Limit: $24,500: For 2026, according to IRS regulations, the basic employee 401(k) elective deferral limit is $24,500.
Total Plan Limit: $72,000: The overall Defined Contribution Plan limit includes employee and qualifying employer contributions.
More Room with a DB Plan: DB Plan funding is calculated separately based on factors such as age, compensation, retirement timing, and plan design.
Why Combine a 401(k) and a DB Plan?
Increase retirement savings: A DB Plan may allow business owners who are already near the 401(k) limit to put substantially more toward retirement.
Reduce taxable income: Qualifying employer contributions to a DB Plan are generally deductible and may further reduce income taxes for the year.
Tax deferred investment growth: Funds inside the retirement plan can remain invested, with taxes on investment earnings generally deferred until distribution.
DB Plan Funding
Based on Your Situation: The amount depends on factors such as age, compensation, retirement goals, and plan design.
2026 Benefit Limit: $290,000: The IRS annual benefit limit for a Defined Benefit Plan is $290,000. Actual annual funding is determined through actuarial calculation.
Who Should Consider Both?
401(k) Already Maxed: The business owner wants to save more for retirement beyond the traditional 401(k) limits.
Higher Tax Liability: The business owner pays a significant amount of federal and state income tax each year.
Consistent Business Profit: The company has stable profits and the cash flow to support additional retirement funding.
Around $400,000+ in Net Income: Based on our planning experience, businesses at this level before owner compensation are often worth evaluating for a 401(k) and DB Plan combination.
401(k) or DB Plan? You May Not Have to Choose
For the right business owner, these two plans can work together to create more retirement savings capacity and additional tax planning opportunities.
If your 401(k) is already near its limit, contact us. We can calculate how much more you may be able to contribute and how much tax you may be able to save.
Lighthouse Consultants is your partner for growth, your guide to success.