What retirement plan shelters the most tax for a high-earning practice owner?
The answer depends on your income level, age, and whether you have employees other than a spouse. For high-earning practice owners like dentists, chiropractors, optometrists, and physical therapists, there are three main options worth considering for 2026.
A SEP-IRA is the simplest. You can contribute up to 25 percent of your net self-employment earnings. Setup is easy, administration is minimal, and you decide each year how much to put in. The downside is that the percentage cap can feel restrictive if your income is very high and you want to shelter more.
A Solo 401(k) offers more flexibility if you have no employees other than yourself or your spouse. You make both an employee contribution of up to around $23,500 for 2026 and an employer contribution of up to 25 percent of compensation. If you’re 50 or older, catch-up contributions add more. Combined, that can reach around $70,000 or more per year. The Solo 401(k) also allows Roth contributions if you want to mix pre-tax and after-tax savings.
For the highest shelter, a defined benefit or cash balance plan can far exceed those limits. These plans can allow contributions of $265,000 or more annually, depending on your age and income. The contribution is calculated based on actuarial assumptions about what you need to fund a guaranteed retirement benefit. The older you are and the higher your income, the more you can typically contribute.
The tradeoff is complexity and cost. Defined benefit plans require annual actuarial reports and have stricter funding rules. They work best when your practice income is stable and high, not when revenue swings year to year. If you have staff beyond a spouse, contributions you make for yourself typically require proportional contributions for eligible employees, which changes the math.
This kind of planning is exactly where working with a CPA and Enrolled Agent on tax strategy pays off. The right plan depends on your specific numbers. A practice owner clearing $500,000 with stable income and no staff has different options than someone making $250,000 with three employees. At Smart Outsourced Solutions, we provide bookkeeping and tax services for practice owners across New England and nationwide, and Simona can help you figure out which retirement strategy fits your situation. Reach out for a consultation to run through your numbers.
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