Defined Benefit vs SEP IRA: Which Retirement Strategy Saves You More in 2025?

You’ve made it. Your income is high, your business is thriving, and your tax bill is enormous.

You know there’s a smarter move sitting just out of reach. And the moment you start looking for retirement strategies that actually move the needle, one question hits you between the eyes:

Should I use a SEP IRA or a Defined Benefit Plan?

I remember when one of my clients, let’s call him Adam, a 52-year-old surgeon earning just over $600,000, asked me that exact question. He didn’t want fluff. He didn’t want theory. He wanted results.

And what he found shocked him.

While both plans reduce taxable income, only one has the power to cut a six-figure tax bill in half. Only one gives control over retirement and IRS exposure. Only one turns income into legacy.

That choice is a dividing line.

Choose right, and you accelerate wealth. Choose wrong, and you leave tens of thousands on the IRS’s desk every year.

This isn’t about financial planning in the abstract. It’s about power. Tax power. Exit power. Freedom power.

So if you’re making $300K, $500K, or more, and still using off-the-shelf tax strategies built for middle-income employees, you’re already behind.

But here’s the good news: You’re not too late. You’re just one decision away from catching up.

SEP IRA: Simplicity with Limits

You’ve heard it before.

“SEP IRAs are easy. Just set it up, contribute a chunk of your income, and enjoy the tax deduction.”

Sounds good on paper. Sounds even better when a CPA recommends it without knowing how aggressively the IRS allows high earners to save.

Here’s what they don’t tell you.

What It Offers

Yes, a SEP IRA is quick to implement. You can deduct up to 25% of your compensation, with a cap of $69,000 in 2025. There are no annual filings. No actuarial calculations. No need for an ongoing plan administrator.

If you’re self-employed and pulling in modest revenue, this can be an effective tool.

But modest revenue is not your situation.

Where It Falls Apart

That $69,000 cap? It’s a ceiling that suffocates growth once your income crosses $300K.

You’re paying hundreds of thousands in tax… and you’re only sheltering a sliver.

I’ve seen this play out dozens of times: entrepreneurs, doctors, consultants, people crushing it in their industries, getting boxed into retirement plans that were never built for them.

They play by rules meant for employees. And they lose.

A SEP IRA doesn’t grow with your income. It doesn’t let you stack savings. And worst of all, it keeps your strategy small when your tax liability is huge.

Who Still Uses It and Why It’s Risky

Some stick with SEP IRAs out of habit. Others because their accountant never showed them another path. The most dangerous reason? Because they think “simple” means “smart.”

But here’s the truth.

Simple caps your potential. Strategic compounds it.

Defined Benefit Plan: Maximum Contributions, IRS Complexity

If a SEP IRA is a tax deduction, a Defined Benefit Plan is a financial engine.

This isn’t a theory. This is what high-income professionals use when they’ve outgrown entry-level strategies, and want to slash taxes while accelerating retirement.

Let’s make it real.

What It Delivers

A percentage of income doesn’t cap a Defined Benefit Plan. It’s structured by actuarial math. That means contributions can soar past $200,000–$300,000+ per year, especially if you’re 45 or older and bringing in consistent high income.

And yes, it’s all tax-deferred. You write that off your income this year. Not in theory. Not in a spreadsheet. On your return.

It gets better.

You can pair it with a 401(k). You can design it around an exit plan. You can scale contributions based on business performance.

This isn’t just retirement. This is tax engineering.

Who It’s Built For

If you’re 45+, earning $300K+, and want to compress decades of retirement savings into your next 10 years, this is built for you.

• Surgeons preparing for exit

• Consultants approaching semi-retirement

• Partners in firms with fluctuating income

• Solo business owners wanting to exit with millions intact

These aren’t hypotheticals. They’re real profiles of clients who’ve used defined benefit plans to slash taxes and retire faster, with Silver Tax Group guiding every step.

Where Most Get It Wrong

Here’s where things go sideways.

They try to set it up themselves. They rely on CPAs unfamiliar with IRS funding rules. They ignore the strict requirements around plan filings, annual contributions, and actuarial certifications.

And then? Audits. Penalties. Missed deductions.

The IRS does not forgive ignorance. But it rewards those who understand the rules, and use them legally, aggressively, and correctly.

That’s why we build these plans strategically. We don’t guess. We calculate. We align them with your S-corp or partnership. We build it so it works, on paper, in practice, and under audit.

Because high contribution power is only an asset when it’s bulletproof.

Real Tax Math: SEP IRA vs Defined Benefit (With 2025 Data)

Talk is cheap. Numbers cut through the noise.

Let’s put two strategies side by side, using real 2025 contribution limits. These aren’t theoretical models. This is what you’re actually allowed to deduct. And this is how fast those decisions compound.

Side-by-Side Comparison (Formatted Table)

The Real Impact of These Numbers

Let’s break this down for a 52-year-old business owner earning $475,000.

• SEP IRA deduction: ~$69,000

• Defined Benefit Plan deduction: ~$220,000

• Difference: $151,000 in extra pre-tax savings

If you’re in a combined federal and state marginal tax bracket of 42%, that’s an instant $63,420 tax savings in year one.

Multiply that by five years, and we’re looking at over $300,000 in protected wealth. All legal. All IRS-recognized. All off your current income, not some future distribution.

Now let’s say you layer in a solo 401(k) alongside the Defined Benefit Plan. That’s another ~$30,500 in deductions. The gap just widened.

This is how the affluent break the ceiling, and how the average keeps handing the IRS a bonus check every April.

IRS Complexity: Why Affluent Clients Need Legal Strategy

Here’s what most high earners never get told.

The IRS isn’t just taxing your income. It’s testing your understanding of its rules.

With defined benefit plans, the tax code gives you power. But it hides that power behind layers of compliance, deadlines, and actuarial formulas. That’s not an accident. It’s a filter. It separates the compliant from the exposed.

What the IRS Requires And What Happens When You Miss

• Annual funding obligations

• Required minimum distributions

• Formal plan documentation and amendments

• Ongoing actuarial validation

• Form 5500 series filings

• Employer deduction limitations

• Excise tax triggers for underfunding or overfunding

Skip one. Miss one. File late once. The IRS will treat your entire plan like it was invalid from the start. That means tax penalties, disqualified deductions, and years of compounding gone.

I’ve seen it firsthand. One client came to us after a “DIY” setup failed to file their Form 5500 for three years. They owed back taxes, penalties, and interest. The original strategy that should have saved them $400,000 turned into an IRS bill topping $200,000.

That mistake wasn’t about math. It was about strategy. Or the lack of it.

Why Silver Clients Never Face This Alone

We don’t let our clients walk through this maze blind. We build their plans with compliance baked in.

• Entity structuring aligned with contribution limits

• Custom actuarial designs based on income forecasts

• Legal review of every filing and amendment

• IRS-preparedness built into the annual review

This is what legal tax strategy actually means. Not playing defense after a mistake. But setting up a plan that stands up to IRS scrutiny, before they ever knock.

Because if you’re playing at the high-income level, strategy isn’t optional. It’s mandatory.

Case Study: How One Business Owner Saved Over $240,000 in Taxes in 18 Months

Let me introduce you to Jordan.

He runs a specialized consulting firm out of Texas. Revenue hovers around $500,000 a year. At 54, he was done with “basic” advice. His CPA had him in a SEP IRA. Safe, capped, and ineffective.

Each year, he was deferring around $69,000. His tax bill? Still crushing. He knew there had to be a better move, but every conversation ended in the same circle: “That’s just how retirement plans work.”

Then he found us.

We ran the numbers. Not hypotheticals. Not “what-ifs.” Jordan could contribute $228,000 to a defined benefit plan in year one. Add a solo 401(k) on top? That total hit $258,500. All tax-deferred. All compliant.

The Result

• Immediate tax savings: $106,000 in year one

• Year two savings: $134,000 after adjusting the contribution formula

• Combined: $240,000+ back in Jordan’s pocket, not the IRS’s

Even better? That plan helped him accelerate his retirement window by six years.

He’s still consulting. Still building. But now he does it on his terms, with a tax strategy working for him, not against him.

Why This Works Again and Again

Jordan’s story isn’t rare. He’s not a unicorn. He’s just someone who stopped trusting generic advice and started using the tax code like a weapon.

This is what happens when a high-income earner stops settling, and starts structuring.

Final Verdict: Strategy Wins, Not Simplicity

Let’s strip this down.

A SEP IRA is easy. That’s the trap.
A Defined Benefit Plan is complex. That’s the point.

Because complexity, used correctly, becomes leverage. And leverage is what separates the average from the affluent.

You’re not trying to save a few bucks. You’re trying to build a tax-efficient exit. Protect legacy wealth. Accelerate your timeline while the IRS rules still allow it.

Your Choice, Your Outcome

• Choose simplicity, and you’ll max out at ~$69K in annual deductions.

• Choose a strategy, and you could shelter $200K+, year after year.

• One lets you feel like you’re doing something.

• The other changes everything.

The difference? It isn’t just in the form you file. It’s in the vision you pursue.

Why Silver Tax Group Exists

We don’t guess. We don’t theorize. We don’t hand you brochures and tell you to talk to your CPA.

We engineer retirement strategies that legally outmaneuver the IRS.

We’ve helped business owners defer millions. Reduced tax bills by six figures. Built exit plans that convert income into long-term control.

And if you’re reading this, you’re likely one of the few who qualifies for that level of strategy.

So now comes the real decision:

Keep guessing. Or start planning. Contact Silver Tax Group today.