Slash Your Tax Bill with 401(k) & Cash Balance Plans!
The Definitive Guide to Squeezing Six-Figure Deductions from Solo 401(k)s and Cash Balance Pensions
Hello Friends!
Legally reducing your taxable income while supercharging your retirement nest egg is not a pipe dream—it’s a proven strategy that countless high-earning solopreneurs and small business owners use every year. In 2025, thanks to updated IRS limits and provisions from the SECURE Act 2.0, these tactics will become even more powerful.
If you’re earning above $250K—whether you’re a consultant, physician, attorney, or digital entrepreneur—this comprehensive guide will walk you through how to combine Solo 401(k) plans and Cash Balance Pension Plans to shelter potentially hundreds of thousands of dollars from taxation annually. We’ll also tackle the age-old debate of Pre-tax vs. Roth contributions so you can sculpt a retirement portfolio that balances both immediate tax savings and long-term tax freedom.
The 2025 Landscape: Bigger Contributions, Higher Tax Rates, and More Opportunities
Higher Contribution Caps:
The Solo 401(k) employee deferral limit has risen to $23,000 for 2025 (a ~3.2% increase from 2024), and the employer profit-sharing component can push total contributions to $69,000—making the combined potential an impressive $92,000.
A SEP IRA now caps at $66,000, still a respectable sum but often less attractive than the Solo 401(k) for those making $200K+.
Mounting Tax Pressures:
The highest marginal federal rate is expected to revert to 39.6% when the TCJA sunsets, with state taxes adding anywhere from 0%–13% more. That’s a potential combined rate of 40%–50%, underscoring why maximizing deductions is paramount.
SECURE Act 2.0 Enhancements:
New rules refine catch-up contributions, expand Roth options, and preserve the “Mega Backdoor Roth” strategy. For high earners, these amendments mean more ways to stuff tax-favored vehicles with large sums of money.
The U.S. Federal Reserve reports that over $22 trillion resides in retirement accounts—money primarily grown tax-deferred over time. This figure didn’t happen by accident; it stems from decades of deliberate planning by individuals and businesses who’ve leveraged the tax code to keep more of what they earn. In 2025, you can join them by taking advantage of these legal “loopholes” more aggressively than ever.
Solo 401(k) vs. SEP IRA: Which Saves You More on Quarterly Taxes?
If you’re a solopreneur (no full-time employees other than yourself and perhaps a spouse), you’ve likely heard of the Solo 401(k) and SEP IRA. Both let you make tax-deductible contributions to reduce your taxable income—thus lowering the bite of quarterly estimated taxes.
Key 2025 Contribution Limits
Solo 401(k):
Employee Deferral: $23,000 (for 2025)
Employer Profit-Sharing: 25% of net self-employment income (capped at $69,000)
Maximum Total: up to $92,000
SEP IRA:
25% of net self-employment income
Maximum: $66,000