Single Cardiologist age 37 with 400k of income

Dr V is a Cardiologist who receives a 1099 as an independent contractor of 400k. He is single age 37 and is taxed as a sole proprietorship. Dr V’s goal was to maximize his tax deductions. This client didn’t have a need to buy life insurance in the plan.

We setup a combination 401k and profit sharing plan with a fully insured defined benefit plan and he was able to make a contribution of $103,719 for 2016.

Here is the math - ($15,900 profit sharing plan) + ($18,000 401k) + $69,819 for the annuity in the defined benefit plan.

Dr V liked this solution because it satisfied several goals:

  1. He was able to aggressively save for retirement which is his primary goal and made an annual contribution of $103,719 in 2016.
  2. He was able to get a $103,719 tax deduction. Based on a 33% marginal tax bracket this saved him $34,277 in federal taxes.
  3. Based on an annual contribution to the defined benefit plan of $69,819, the minimum guaranteed policy value for the annuity at retirement age 62 on December 1, 2041 is $2,621,924.
  4. In addition he will have the value of the 401k and profit sharing plan.

In 2016 $33,900 can be made into the 401k and profit sharing plan. Annual contribution limits can potentially increase with future IRS increases to the contribution limits. The value of the 401k and profit sharing plan at retirement would be determined based on market performance. These values are not guaranteed. The 401k and profit sharing would supplement the $2,621,924 guaranteed minimum in the annuity in the defined benefit plan at retirement at age 62.

Here is a case study of a married physician with $550,000 of income. He has two children ages 4 and 2 and his wife works for the business. This client wanted to buy life insurance in the defined benefit plan since he was the income provider for his family and he wanted his family to have the protection.

Need Help or Advice?

Eric Kuniholm Eric Kuniholm, CPWA®
Certified Private Wealth Advisor®
Beacon Capital Management Advisors

If you would like to receive a free defined benefit plan proposal or have questions and need advice contact us. Beacon Capital Management Advisors is registered in all 50 States and is an Accredited Business of the Better Business Bureau since 2004. FINRA’s BrokerCheck.

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