Successful lobbying has garnered high income. A defined benefit pension plan can cover both principals to set up nice retirements.
Dawn and Cheryl both served in the army for thirty years, retiring in their mid-50’s. They receive military pensions and government health care. They worked for a number of years post-retirement in Washington DC for various consultants. They then decided to focus on the rights of women serving in the military, and founded their own lobbying firm to pursue that goal. They set up an LLC, and split the income they earn 50/50.
They plan to pursue their dream for another decade, or “until their energy runs out,” whichever is later.
Their initiative is gaining traction, and they estimate that their share of the income their LLC with spin off will rise to $125,000 each by next year.
Their advisor recommended a defined benefit plan. Here is why:
Defer income that they do not currently need, even all of it, if their military pensions and health care coverage cover their family’s current budgetary needs.- Garners them the government’s “interest-free loan” on the taxes they defer.
- Supplement their military pensions with a second pension in retirement.
- Reduce, as well as defer, taxes, as their pension payments could incur a lower tax rate in the year they are issued.
Anyone who is self-employed, whether they work as a sole proprietor or through a corporate structure like an LLC, can adopt a small-business defined benefit plan to shelter much or all of their self-employed income from current tax obligations.
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