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Question for the Money Doctors

Question submitted on Apr 25, 2013.

Question

My wife is a independent contractor. We would like to open a Defined Benefit plan for future savings, do you have any recommendations ?

Answer

Yes. If she is the only employee of her business, a DBPP can be an incredible tax savings vehicle. You will however need to hire an actuary or a TPA (3rd party administrator) who works with actuaries to have them set up the plan and do the annual calcuation. Costs should run about $1500 or so to set up the plan and about that amount every year to administer. If she has had this business and make some good profits for the past 2-3 years or more, you would be surprised as to how much she coudl put away. I have seen ranges of 30% to 95% of earnings fully deductible.


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