Home What the Financial Crisis Means for Main Street Top Tax Deductions The Culture of Strategic Cost Management Cash Flow Control + Smart Increased Credit Extension = Improved Profit Building Your Sales Bench Protecting Your Business from Check Fraud Going Solo Might Be Right for You Hints and Reminders Retirement Your Way From individual 401(k) plans and IRAs to profit-sharing, Wells Fargo offers a complete suite of retirement plans. Maximize retirement income and retain employees with the right retirement plan for your company. Benefit from our proven expertise to deliver exceptional results and let us help you develop a retirement strategy for your business. Wells Fargo Investment and Insurance products: Are NOT insured by the FDIC or any other federal government agency. Are NOT deposits of or guaranteed by the Bank or any Bank affiliate. May lose value.

If you’re looking to sock away as much as possible now, you might want to consider a Solo Defined Benefit plan (Solo-DB). With a traditional defined benefit plan, you set a target for monthly or annual dollars you want to receive when you retire. Your annual contributions to the plan are calculated based on your current age, the average of your three highest years of income, your planned retirement age and the balance you have in the plan. Annual contributions are mandatory, and a higher targeted benefit will result in greater required annual contributions.

The Solo-DB plan operates on the same principle as its traditional, corporate counterpart, but it’s designed for sole proprietors and business owners with four or fewer employees. To make it work, you’ll need a high income, a good chunk of cash to contribute annually and the ability to maintain your current level of earnings for several years:

The Solo-DB plan typically requires that your business has been running for three or more years and that you make ongoing mandatory annual contributions of over $45,000 per year for three years or more (or until the plan is fully funded). Any business is eligible and employees who have worked at least 1,000 hours in the past year are eligible. The Solo-DB plan’s main benefit is that there is no cap on contribution limits; however, annual retirement income is currently capped at $180,000 (actuarial formulas state that the maximum amount you can accumulate is just over $2 million). You can make your contribution work even harder when it’s combined with an individual 401(k) plan. In a combined strategy, you can contribute to the defined benefit plan as opposed to contributing through the profit sharing part of the individual 401(k) (only one of the contributions is allowed). And a match up to a limit and employee deferral is still allowed in the 401(k). For husband and wife teams or partnerships, the combined defined benefit contribution can double for a full tax deduction. In that case, the additional contribution to an individual 401k can be up to $31,000 (with only the combined employee deferral amount for those under age 50, or higher for those over 50).

The paperwork and fees for set-up and administration of a Solo-DB plan can run higher than those of an individual 401(k), for example, but the savings potential can more than make up for the time and costs involved. Based on increased demand, the plans are becoming easier to implement. To learn more, check out “The Tax Advantages of a Defined Benefit Plan” podcast from AllBusiness. Before making any decisions about your retirement plan, speak with your plan administrator or financial advisor.