Defined Benefit Plans
The Powerful Retirement Solution
for Business Owners
Defined Benefit Plans
The Powerful
Retirement Solution
for Business Owners
Business Owners
Maximize Tax Savings & Secure Your Financial Future
A defined benefit (DB) plan is one of the most effective—yet underutilized—retirement strategies for business owners seeking substantial tax deductions, accelerated retirement savings, and long-term financial security. Unlike 401(k)s or profit-sharing plans, DB plans allow high-income earners to contribute significantly more each year while reducing taxable income.
If you’re a business owner looking to save aggressively for retirement, lower your tax burden, and retain key employees, a defined benefit plan could be your best financial move.
A Defined Benefit Plan Explained
A defined benefit plan is a traditional pension plan that promises a specific monthly benefit at retirement, based on factors like salary history and years of service. Unlike defined contribution plans (e.g., 401(k)s), where contributions fluctuate, DB plans allow for predictable, high-value contributions—often $100,000+ per year—making them ideal for business owners who want to:
✔ Maximize tax-deductible contributions
✔ Save more than 401(k) limits allow
✔ Provide a powerful employee retention tool
✔ Secure a guaranteed retirement income
How defined benefit plans differ from 401(k)s
Unlike a 401(k), a defined benefit (DB) plan does not have an annual contribution limit, but instead limits the maximum annual benefit a person can receive in retirement. The amount an employer can contribute is determined by an actuary based on a participant’s age, income, and other factors to ensure the plan can fund the promised future benefit.
Feature | Defined Benefit (DB) Plan | 401(k) Plan |
Focus | Promises a specific, guaranteed benefit in retirement. | Focuses on contributions; retirement benefit is not guaranteed. |
Annual Limit | Has no limit on contributions, but instead caps the final annual benefit. | For 2024, the total employer and employee contribution limit is $69,000. |
Funding | The employer funds the plan and bears all the investment risk. | Primarily funded by employees, who also bear the investment risk. |
Tax Deduction | An employer can make very large, tax-deductible contributions in order to meet the promised future benefit. | Employer contributions are tax-deductible for the business, but are capped. |
Secure your retirement—and your business’s future—with a tax-smart pension plan.
If you’re a high-earning business owner looking to maximize retirement contributions and drastically reduce taxable income, then a defined benefit plan could be your most powerful financial tool. Connect with a financial professional to learn more.
IMPORTANT DISCLOSURES
Product availability varies by carrier, state, and individual eligibility. Not all products listed are available in all states or to all applicants. Product descriptions on this page are for general informational purposes only and do not constitute a solicitation or offer to sell any specific insurance or annuity product. All products are subject to underwriting approval and applicable state insurance regulations. Riders and benefits are subject to additional charges, terms, conditions, and limitations. Variable products involve investment risk, including possible loss of principal, and are sold by prospectus. FundaDream Insurance Solutions, Inc. is a licensed California insurance corporation. Consult the applicable carrier contract for full terms, conditions, and limitations. FundaDream’s charitable giving is made from general corporate revenues at the sole discretion of FundaDream leadership and does not constitute compensation to any licensed insurance professional.
The decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. While the policy allows for loans, you should know that there may be little to no cash value for loans in the policy’s early years.
The information provided is not written or intended as specific tax or legal advice. FundaDream, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
Insurance products and services are offered through FundaDream Insurance Solutions, Inc., California License No. 0M95835