Which retirement plan is most appropriate for a business owner nearing retirement with a strong cash flow?

A traditional defined benefit pension plan is particularly suitable for a business owner nearing retirement with a strong cash flow because it provides a structured way to secure a significant retirement income based on a predetermined formula. This type of plan allows the business owner to contribute large amounts based on their earnings and to design the plan in a way that ensures retirement benefits are guaranteed.

Given the owner's strong cash flow, they can capitalize on the higher contributions allowed under this plan, which can lead to substantial retirement benefits. Additionally, a defined benefit plan can be particularly advantageous as the owner ages, allowing for potentially significant tax-deductible contributions that reduce taxable income while building a reliable income source for retirement.

In contrast, other retirement savings options, while beneficial, may not provide the same level of guaranteed income or contribution flexibility. For example, a Simple IRA has lower contribution limits, while a Roth IRA has income limits that could restrict high earners from making contributions directly. A Solo 401(k) offers benefits, but it may not provide the guaranteed benefits that a defined benefit plan does, especially for someone seeking long-term income security as they approach retirement. Therefore, a traditional defined benefit pension plan stands out as an optimal choice in this context.