Defined Benefit Plans
for Medical Professionals

A Tax Strategy for Individuals
with Self-Employment Income and
Small Prac...
Defined Benefit Plans ─ in the News
High-Income Clients Save More
With These Underutilized Retirement Plans
“From a short-...
Today’s Presenter

Replace with your photo






Dempster R. Cherry
Financial Advisor
SagePoint Financial.
619.465.544...
Agenda
 The Personal Pension Plan
– Defined Benefit Plans At a Glance
– Compared to Other Retirement Plans
– The OnePerso...
Defined Benefit Plans at a Glance
 Qualified retirement plan approved by the IRS

 Contributions are tax deductible
 Hi...
Comparison of Retirement Plans
SIMPLE
SEP
Single 401(k)

$21,500

$50,000
$55,500
$161,700

DB

$199,200

DB + 401(k)

Hyp...
Defined Benefit Plans are Goal-oriented
 Goal or “benefit” represents the amount of retirement
wealth the plan will provi...
OnePersonPlus from Dedicated DB

A Great Tax Strategy for Baby Boomers!


Typical Plan Sponsors
• Medical professionals, ...
Dr. Charles, Owner-only, Age 52
Sole proprietor, Wants Maximum Tax Deduction
 Annual earnings: $450,000

 Maximum DB+ 40...
The Impact of Age on Contribution:
The Older, The Better
Doctor Charles
 Age 52
 10 Years to Retirement
 Compensation: ...
Paul, Age 60, Mary, Age 58
Anesthesiologists, C-Corp
Married Couple in Business Together
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5 years from retirement
W-...
Mollie, Dentist, Age 55
+2 Employees
Dentist, C-Corp


Owner’s W-2 income: $400,000
Employee 1 age 28 earning $35,000
Emp...
Walter, Age 60, Professor at Med School
Wants to Secure Retirement
with Side Income, Sole Proprietor
In addition to univer...
Kumar, Age 48, Radiologist, C-Corp
Wants high contributions in 2012 but needs
flexibility as his income fluctuates
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
...
Eligible Compensation for a DB Plan

15
Copyright 2012 Dedicated Defined Benefit Services LLC
Key Dates


DB Plans must be opened by the end of your fiscal
year, for most businesses that will be December 31st.



T...
Fees
Defined Benefit Plan
 DB Plan Set up: $1200 plus $50 per participant
 DB Annual Administration: $1600 plus $100 per...
Establishing a Plan
1. We can run a feasibility proposal for you
2. Bring your accountant into the discussion early
3. Onc...
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Defined Benefit Plan For Physicians

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Allowing High Income earners the largest IRS approved contribution to a qualified retirement plan

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  • In this example the independent doctor has fluctuating income. He can get a significantly higher contribution in good income years by establishing both a DB and a 401(k). If his income is lower another year, he makes no contribution to the 401(k).
  • How you have set up your business will determine what is considered income and how your plan is designed. Generally, you can contribute more if you are set up as a corporation.
  • Defined Benefit Plan For Physicians

    1. 1. Defined Benefit Plans for Medical Professionals A Tax Strategy for Individuals with Self-Employment Income and Small Practice Owners
    2. 2. Defined Benefit Plans ─ in the News High-Income Clients Save More With These Underutilized Retirement Plans “From a short-term standpoint, there’s absolutely nothing that can equal this for me or anyone older with excess income and big taxes...” Financial Advisor Magazine, December 2011 A Pension Plan for the Self-Employed “Solo pension plans are a great option for entrepreneurs, doctors, and real estate agents who want to slash their taxes and turbo charge retirement savings.” Kiplinger’s Retirement Report, August 2011 “Retro-Pension: Defined-benefit plans for small businesses can help owners catch up on savings” Financial Planning Magazine, February 2011 “Creating a pension plan helps business owners and the self-employed sock away more tax-deferred cash for retirement” Smart Money, October 2008 2 Copyright 2012 Dedicated Defined Benefit Services LLC
    3. 3. Today’s Presenter Replace with your photo     Dempster R. Cherry Financial Advisor SagePoint Financial. 619.465.5442 3 Copyright 2012 Dedicated Defined Benefit Services LLC
    4. 4. Agenda  The Personal Pension Plan – Defined Benefit Plans At a Glance – Compared to Other Retirement Plans – The OnePersonPlus® Program from Dedicated DB  Ideal Financial Situations  Meeting Your Needs – – – – – Eligible Compensation Key Dates Fees Opening a DB Plan Follow through 4 Copyright 2012 Dedicated Defined Benefit Services LLC
    5. 5. Defined Benefit Plans at a Glance  Qualified retirement plan approved by the IRS  Contributions are tax deductible  Highest available contributions and tax deductions of any qualified retirement plan  Contributions are based on: – your age – income – years to retirement 5 Copyright 2012 Dedicated Defined Benefit Services LLC
    6. 6. Comparison of Retirement Plans SIMPLE SEP Single 401(k) $21,500 $50,000 $55,500 $161,700 DB $199,200 DB + 401(k) Hypothetical Example: Maximum annual contribution limits in 2012 for a Medical Professional age 52, earning $250,000 annually, retiring in 10 years Assumes 5-7% funding rate for Defined Benefit Plans 6 Copyright 2012 Dedicated Defined Benefit Services LLC
    7. 7. Defined Benefit Plans are Goal-oriented  Goal or “benefit” represents the amount of retirement wealth the plan will provide annually at retirement age  Benefit is established when plans are opened – Based on age, income and years until retirement – Capped at $200,000 per year (for 2012)  Employer commits to achieving the goal through regular, annual contributions large enough to meet the goal  Retirement age is typically set at age 62 or older  Plan can be amended to change the goal 7 Copyright 2012 Dedicated Defined Benefit Services LLC
    8. 8. OnePersonPlus from Dedicated DB A Great Tax Strategy for Baby Boomers!  Typical Plan Sponsors • Medical professionals, age 40+ • Owner + up to 4 employees • Expect to Contribute 5 successive years  New Plans • Avg. annual contributions: $120,000* • Avg. term: 8+ years • Integrates with a solo 401(k)  Dedicated DB’s Service • Prototype plan documents eliminates cost of actuary, tax attorney • Easy to open, efficient to administer – 2-page adoption agreement, simplified forms, pre-filled annual census • Set up fee and annual administration fee • No administration fees based on size of your account  You and Your Financial Advisor Select the Investments * Based on 2011 first year contributions to Dedicated Defined Benefit Services DB plans. 8 Copyright 2012 Dedicated Defined Benefit Services LLC
    9. 9. Dr. Charles, Owner-only, Age 52 Sole proprietor, Wants Maximum Tax Deduction  Annual earnings: $450,000  Maximum DB+ 401(k) contribution for 2012: $199,200 – Contribution to DB Plan: $161,700 – Contribution to 401(k): $37,500  Annual tax savings: $75,600 – Combined marginal tax rate of 38%  DB Accumulation at age 62: $2.42 Million – 10 years, 5 - 7% rate of return  Annual DB Benefit: $200,000 9 Copyright 2012 Dedicated Defined Benefit Services LLC
    10. 10. The Impact of Age on Contribution: The Older, The Better Doctor Charles  Age 52  10 Years to Retirement  Compensation: $450,000  DB Contribution: $161,700  Annual Benefit at Retirement: $200,000 Doctor Tim  Age 35  27 Years to Retirement  Compensation: $450,000  DB Contribution: $25,800  Annual Benefit at Retirement: $200,000 10 Copyright 2012 Dedicated Defined Benefit Services LLC
    11. 11. Paul, Age 60, Mary, Age 58 Anesthesiologists, C-Corp Married Couple in Business Together    5 years from retirement W-2 Income: $500,000 ($250,000 each) Total annual DB contribution: $399,800 $195,700 towards Paul’s retirement $204,100 towards Mary’s retirement   Annual combined income tax savings: $151,900 Accumulation at retirement: Paul: $1.13 Million Mary: $1.18 Million 11 Copyright 2012 Dedicated Defined Benefit Services LLC
    12. 12. Mollie, Dentist, Age 55 +2 Employees Dentist, C-Corp  Owner’s W-2 income: $400,000 Employee 1 age 28 earning $35,000 Employee 2 age 35 earning $45,000  2012 DB contribution for owner: $188,200 DB Contribution for Employee 1: $4,900 DB Contribution for Employee 2: $9,500 93% of contribution for Mollie   Annual income tax savings for Mollie: $71,500* Retirement accumulation for Mollie at 62: $1.69 Million *Assumes 38% combined state/federal marginal rate 12 Copyright 2012 Dedicated Defined Benefit Services LLC
    13. 13. Walter, Age 60, Professor at Med School Wants to Secure Retirement with Side Income, Sole Proprietor In addition to university salary, Walter has self-employment income from consulting & serving on 2 biotech boards     Annual self-employment earnings: $100,000* DB contribution for 2012: $80,000 Annual tax savings: $30,400 combined marginal tax rate of 38% DB Accumulation at age 65: $464,400 5 years, 5 - 7% rate of return * High 3-year average, after payment of self-employment taxes 13 Copyright 2012 Dedicated Defined Benefit Services LLC
    14. 14. Kumar, Age 48, Radiologist, C-Corp Wants high contributions in 2012 but needs flexibility as his income fluctuates      2012 W-2 earnings: $135,000 Maximum DB contribution for 2012: $63,900 + 401(k) contribution for 2012: $25,100 Total deduction in 2012: $89,000 2012 tax savings: $33,800 – combined marginal tax rate of 38%  DB Accumulation at age 62: $1.63 Million – 14 years, 5 - 7% rate of return  Annual DB Benefit: $135,000 Copyright 2012 Dedicated Defined Benefit Services LLC
    15. 15. Eligible Compensation for a DB Plan 15 Copyright 2012 Dedicated Defined Benefit Services LLC
    16. 16. Key Dates  DB Plans must be opened by the end of your fiscal year, for most businesses that will be December 31st.  The Investment Account will be opened once the Adoption Agreement is signed. If you open the plan before year end, we recommend investing no more than 50% of the assets before you have your final year-end income statement.  The investment account must be funded when taxes are filed but no later than eight and a half months after the end of your fiscal year. 16 Copyright 2012 Dedicated Defined Benefit Services LLC
    17. 17. Fees Defined Benefit Plan  DB Plan Set up: $1200 plus $50 per participant  DB Annual Administration: $1600 plus $100 per participant OR Defined Benefit & 401(k)  Plans Set up: $1400 plus $50 per participant (owner and spouse only)  Annual Administration: $2050 plus $200 per participant (owner and spouse only) 17 Copyright 2012 Dedicated Defined Benefit Services LLC
    18. 18. Establishing a Plan 1. We can run a feasibility proposal for you 2. Bring your accountant into the discussion early 3. Once the plan meets your objectives, we’ll complete a Set-up Questionnaire • Send signed Questionnaire to Dedicated DB • With Set-up Fee 4. We’ll send you an Adoption Agreement to sign 5. You can begin to fund the investment account 18 Copyright 2012 Dedicated Defined Benefit Services LLC

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