Feature · The Mispriced Instrument

The six-figure shelter hiding in plain sight.

Business owners earning between $400,000 and $5 million are systematically under-sheltered by a factor of ten. The instrument that fixes this has existed since 1974. The industry that should be selling it does not.

Written by Solomon Katsman · Wealth Strategist · 15 min read

The standard 401(k) caps contributions at $23,500. A properly designed Defined Benefit plan can shelter $275,000 or more per year for a business owner in their fifties — tax-deductible, creditor-protected, and entirely legal under the Employee Retirement Income Security Act of 1974. The gap is not a secret. It is a pricing failure.

The people best positioned to exploit this gap — owner-operators of profitable small businesses — are the ones least likely to have it explained to them. Their CPA filed a return. Nobody designed a plan.

Continue to the feature →

The Feature · Continued

Why the most valuable retirement strategy for business owners is the one least marketed to them.

Most business owners inherit their retirement strategy from a payroll vendor. You received a 401(k) because your HR platform offered one. The contribution ceiling was chosen by a salesperson who never had to defend it, because it matched the previous client's ceiling — and the previous client did not complain.

This is not malice. It is the default. The default is expensive.

A Defined Benefit plan is a different instrument entirely. It is actuarially-designed to fund a target retirement benefit, which means the contribution math runs in the opposite direction: you start with the outcome, and the annual contribution is whatever produces it. For a 55-year-old earning $600,000, that math routinely lands between $180,000 and $275,000 — per year, tax-deductible.

Multiplied across a decade, with tax-deferred compounding, the difference is not marginal. It is the difference between a retirement and a legacy.

The reason most business owners have not heard this pitch is structural. DB plans require actuarial certification — they cannot be sold by a call-center — and the commission structure rewards product sales, not plan design. The instrument is legal, elegant, and widely available. It is also inconvenient to sell, and so it is not sold.

That is the pricing failure. That is the opportunity.

Departments

Three notes worth the time.

Shorter pieces — each a single idea, with numbers. Written for the owner-operator who skims for value and occasionally doubles back.

What your CPA is not telling you (and why).

Most CPAs file returns; they do not design plans. The economic incentives of tax preparation and the economic incentives of tax strategy point in opposite directions — and the gap between them is your unrealized contribution ceiling.

9 min · Read →

III

Three client vignettes, anonymized.

A dental practice at age 52. An S-Corp founder at 58, three years from exit. A five-partner medical group. Three distinct plan designs, three distinct shelter ceilings, one common observation.

11 min · Read →

The math on ten years of deferred compounding.

A $200,000 annual shelter, compounded over ten years at a modest return, is not a linear story. The tax deferral compounds on the compounding. The arithmetic is quiet — and then it is enormous.

6 min · Read →

— The Archive —

Four issues a year. This is issue one.

N° 01· Current ·

The six-figure shelter hiding in plain sight.

April MMXXVIRead →

N° 02· Forthcoming ·

Cash balance plans for the larger practice.

July MMXXVI—

N° 03· Forthcoming ·

Pre-exit sheltering: the three-year window.

October MMXXVI—

N° 04· Forthcoming ·

Reader correspondence: the year in questions.

January MMXXVII—

— Correspondence —

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