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Early retirement and a personal defined benefit plan?

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  • #16
    You can't have solo plans if you have employees.  401(k) and CBPs (and DBPs in general) are called "qualified" plans, meaning it has to meet qualifications by not discriminating in favor of owners or high-income employees. If you want to sock away the max, then your employees and any partners have to be able to contribute a likewise high percentage.

    Since the ways to max those qualified plans comes mostly from employer contributions, if those employees/partners earn a lot or are older/nearer retirement, then they'd get higher employer contributions for the CBP, essentially costing the practice (and you) money.

    Konstantin is an expert in this field.  This is literally exactly what he does day-in and day-out.

    Aside, if you think getting rid of loans is more important than tax-advantaged retirement saving, then you either don't understand taxes or your loans have bloody astronomical interest rates.  If you can contribute $250,000 a year to a 401(k)/CBP combo, you save $92,500 in taxes alone assuming 37% marginal rate, even if you don't invest your savings.  Interest on business loans should be tax deductible, so reduce those rates by your bracket (again prob 37%) to figure your real "loss" from interest.  This is not even addressing the open-ended compound gains from your tax-advantaged investments.  However, if there is over $1,000,000 after taxes going into your bank account every year, it doesn't really matter - you've got the income to do whatever you like and be fine, never mind a few percentage points.

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