Retirement vehicles can be especially problematic for entrepreneurs who do not have the guidance of an employer or an employer’s selected plan to assist them in the process of finding the right retirement vehicle. Although defined benefit plans were once a critical element of the retirement landscape in the United States, these have fallen out of popularity in recent years because of the financial crisis. 

Many people typically associated defined benefit plans with public sector employees as well and corporate pensions are becoming less and less available. Defined benefit plans, however, can make sense for at least one type of person; a small business owner and entrepreneur.

These pension plans are an ideal retirement vehicle, giving you a broad range of benefits that can help people to keep a larger share of their wealth and run more effective businesses. Many small business owners including high net worth individuals don’t have any kind of retirement plan in place, much less a pension plan. This means no 401(k), no IRA and no investments.

Small business owners tend to be laser focused on growing their companies and unfortunately, what often gets overlooked in that process is coming up with a way to maximize retirement savings. Any small business owner that is generating more than $200,000 a year in income should consider setting up a pension plan even if they already use retirement vehicles such an IRA or 401(k). Pension plans have some significant benefits including:

• Higher contribution limits
• Employee retention
• Risk mitigation

Small business owners should be aware that annual administration fees can be high, particularly for retirement plans. Consulting with an estate planning lawyer to talk about the connection between your estate planning goals and your business and retirement intentions is extremely important. A successful entrepreneur or high net worth business owner would do well to consider how a pension plan can assist them with growing things and maximizing their retirement options.