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When taxes are too high: Are you maxing out your retirement contributions?


Tips for physicians to reduce their tax bill.

Every so often, physicians will put on their business hats and recognize that their #1 partner is Uncle Sam! If you’re a physician with good cash flow who wants to reduce your tax bill and, perhaps, benefit and retain your key employees, then this article is for you.

Most medical groups offer standard retirement benefits – a 401k with an employer match that would allow physicians and medical staff to save only up to the traditional retirement limits of $20,500, and when they reach the age of 50, an additional $6,500 as well.

What most don’t realize is that there is an opportunity to save much more. A cash balance pension plan has physicians in medical practices across the country saving over $250,000 per year towards retirement, gaining a six-figure tax break, and increasing employee retention.

Through annual means testing – dependent on age, size of staff and tenure of staff – the contribution will be spread amongst all eligible employees. In my experience working with physicians, it’s common to see over 80% of the contribution being allocated to the doctor and the remainder spread out amongst all other eligible employees. The employees will then vest into “ownership” of the benefits, in most cases tying them to the practice for the next 3-5 years to fully own the allotment of their share.

Through means testing, the benefits can be skewed toward key employees, ensuring that the most important members of your organization receive the largest award and have the most reason to want to stay in your practice. In this highly competitive labor market, where employee turnover and attrition are at all-time highs, having a cash balance pension plan in place could play a major role in keeping those employees you really want to retain.

There are many options to consider, such as cost of set up and administration, investment options and fees, as well as the ability to continually meet pension contributions. It’s best to consult with your financial advisor to determine if a cash balance pension plan would be a good fit for your practice.

Ben Soccodato is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. www.SIPC.org6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000. Ben Soccodato, CFP® can be reached at


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