Utilizing Defined Benefit Pension Plans to Lower Taxes

Retired seniors

Photo by Elien Dumon on Unsplash

Based in New Jersey, Ken Mathieson offers a full range of investment solutions as managing director and founding partner of Laidlaw Asset Management, LLC, in New York. Ken Mathieson coordinates solutions that meet high-net-worth individual and family needs in areas such as educational and retirement planning. 

As highlighted in a recent Forbes article, one strategy for contractors and freelancers, as well as small business owners who inhabit high tax brackets, is to employ retirement planning as a way of decreasing tax liabilities. Money that is placed in retirement accounts can be subtracted from what the IRS considers taxable income, thereby bringing one's taxable income to a lower bracket. 

What many small business owners don’t realize is that vehicles like defined benefit (DB) pension plans are not simply for large companies. Accessible to individuals as well, they offer high contribution limits and can be combined with 401(k) and other defined contribution (DC) plans. This could lead to substantial benefits, as of this year DC plans have an upper limit of $56,000 while DB plans have upper limits of $225,000.