Lighthouse Consultants
Sep 9, 2026
A retirement plan might help business owners reduce taxes and build more retirement savings.
A Defined Benefit Plan, or DB Plan, is a qualified retirement plan. For some high-income business owners, it can help increase retirement savings, reduce current year taxable income, and lower income taxes for the current year.
What Makes a DB Plan Different?
More retirement savings potential: DB Plan funding is calculated by an actuary based on factors such as age, compensation, and retirement timing.
In addition to a 401(k): For 2026, the basic 401(k) employee contribution limit is $24,500, and the overall Defined Contribution Plan limit is $72,000.
Higher retirement benefit potential: Under the 2025 IRS rules, the annual benefit under a Defined Benefit Plan can reach $280,000. Actual annual funding is determined actuarially.
Tax Benefits of a DB Plan
Reduce taxable income: Qualifying employer contributions are generally tax deductible.
Lower income taxes: Larger deductible contributions can create meaningful tax savings for owners in higher federal and state tax brackets.
Tax deferred growth: Investment earnings inside the retirement plan are generally tax deferred.
Who Should Consider a DB Plan?
Consistently profitable businesses: The company expects strong profits to continue.
Owners with higher tax liabilities: The owner pays significant federal and state income taxes each year.
Owners who want to save beyond a 401(k): A DB Plan can provide additional retirement funding capacity.
Approximately $400,000 or more in net income: Based on our planning experience, businesses at this level before owner compensation are often worth evaluating.
Is a DB Plan Right for Your Business?
If your business is consistently profitable and pays significant income tax each year, contact us to calculate how much you may contribute, how much taxable income may be reduced, and how much tax may be saved.