Personal Defined Benefit Plan
This plan is somewhat exotic, but might be a good option for those business owners in their 50s but who didn’t save as much as they would have liked. The IRS allows a maximum annual contribution of about $255,000 for people in their 50s. We say “about” because the calculation is based on current age and years to retirement. For younger owners, this is not an attractive option. But a $255,000 tax deduction is.. well.. HUGE.
Total holdings in the plan are limited to $2.3 million to $2.4 million, enough to cover the maximum allowed payment in retirement of $200,000 a year. The IRS also has strict required minimum contribution rules and a steady source of income is fairly important.
Taxpayer’s Comprehensive Guide to LLCs and S Corps
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