Why Ophthalmologists and Other High-Earning Specialists Are Combining Two Plans to Shelter Over $100,000 a Year

A self-employed ophthalmologist in her late 50s earning $500,000 a year from her private practice can legally shelter more than $150,000 of that income from federal taxes in a single year. The vehicle is a combination most high earners have never heard of: a Solo 401(k) stacked on top of a defined benefit pension plan. Together, they function as a contribution engine that no W-2 employee can replicate.

How the Two-Plan Structure Works

A Solo 401(k) allows a self‑employed individual to contribute in two roles simultaneously: as an employee and as the employer. In 2026, the employee deferral limit is $23,500, with an additional $7,500 catch‑up for those 50 and older. The employer profit‑sharing contribution can reach up to 20% of net self‑employment income, bringing the total combined limit to $69,000 for those under 50 and $76,500 for those 50 and older. SECURE 2.0’s enhanced “super catch‑up” for ages 60 to 63 is scheduled to begin in 2026, but final dollar amounts have not yet been published.

A defined benefit (DB) pension plan is actuarially funded, meaning the annual contribution is calculated to deliver a specific retirement benefit by a target age. A solo practitioner in their mid‑50s earning $500,000 annually can simultaneously fund a DB plan based on actuarial calculations targeting a specific annual benefit, often allowing an additional $80,000 to $175,000 in pre‑tax contributions per year, depending on age and income. At age 55, the cash balance contribution limit in a combined structure can reach $262,000 for the DB component alone, with a combined plan total approaching $342,000 when stacked with a 401(k).

For a specialist in the 37% federal bracket, sheltering $150,000 through this structure can yield federal tax savings at the 37% rate, plus state tax savings.

Why Age Amplifies the DB Plan Advantage

The actuarial math behind defined benefit plans favors older business owners. Because there are fewer years to fund the target benefit before retirement, the IRS allows larger annual contributions. Older business owners receive larger contribution allowances because there are fewer years to fund the target benefit, making this strategy most powerful for professionals in their late 50s.

The IRS caps the maximum annual benefit a DB plan can pay at retirement. For 2026, that limit is $290,000 per year. An actuary works backward from that target benefit to determine how much must be contributed annually to fund it by a given retirement age. A 57-year-old with 10 years until retirement needs to contribute far more per year than a 45-year-old with 22 years.

The Mandatory Contribution Requirement

DB plans require annual minimum contributions regardless of business income, and if the business has a bad year, the owner is still obligated to fund the plan. A year with lower collections, a key employee departure, or an unexpected capital expenditure does not reduce the required DB contribution. This is why the strategy works best for practices with stable, predictable revenue. An ophthalmologist with a well-established surgical practice and recurring patient volume is a strong candidate. A solo consultant with lumpy project-based income is not.

There is also a coordination rule that requires attention. A sole proprietor can adopt both a Solo 401(k) and a DB plan in the same year, but contributions to both must not exceed 25% of net self-employment income for the combined employer contribution portion. The actuarial calculation for the DB plan accounts for this limit, so working with a pension actuary is necessary to optimize the structure. The 25% cap does not apply to the employee elective deferral portion of the Solo 401(k), so the $24,500 deferral (or $35,750 for ages 60 to 63) is not subject to this cap.

Managing IRMAA in Retirement

High earners who accumulate large pre-tax balances face a compounding tax problem in retirement. Traditional 401(k) and DB plan withdrawals count as ordinary income. For a specialist couple with $3 million in pre-tax accounts, required minimum distributions starting at age 73 can push MAGI well above Medicare’s IRMAA thresholds.

For 2026, IRMAA surcharges for Medicare Part B begin at $109,000 MAGI for single filers and $218,000 for married filing jointly. A married couple with combined RMD income landing between $342,001 and $410,000 hits IRMAA Tier 3, where the annual surcharge per couple reaches $9,240 for Part B and Part D combined. IRMAA uses a two-year lookback, so income decisions made today affect premiums two years out.

Maximizing pre-tax contributions now reduces the future account balance subject to RMDs. A portion of those contributions can be directed to a Roth Solo 401(k) to build a tax-free bucket that does not count toward MAGI in retirement. The two-plan structure provides additional tools to manage the RMD trajectory over time.

Setting Up the Structure Before Year-End

1. Engage a pension actuary before year‑end. A DB plan must be adopted by December 31 to claim that year’s deduction, and the actuary must calculate the allowable contribution based on age, income, and the target benefit.
2. Confirm employer deduction limits. Solo 401(k) employer contributions are capped at about 20% of net self‑employment income (after the SE tax deduction), and DB plan funding must fit within overall §404 limits, so a CPA and actuary should coordinate; employee deferrals are not part of this cap.
3. Watch IRMAA thresholds. For 2026, IRMAA begins at $218,000 in MAGI (MFJ) and $109,000 (single), so projecting RMDs now and considering partial Roth conversions in lower‑income years can help keep future MAGI below these levels.