In 2025, top federal tax rates stay at 37%, and many dentists also face state income taxes. If you don’t plan ahead, you send more of your income to the IRS instead of building long-term wealth.
Retirement plans give you a legal way to reduce taxable income while securing your financial future. By upgrading your plan in 2025, you shelter more income and lower your tax bill.
2025 Retirement Plan Contribution Limits
The IRS raised contribution limits for 2025. Here’s what you can put away:
- 401(k): $23,500 (plus $7,500 if you’re over 50).
- SEP IRA: Up to $70,000 or 25% of compensation.
- Defined Benefit Plan: Annual benefit limit increased to $275,000.
These changes mean you keep more of your income in your pocket instead of handing it over in taxes.
Which Plan Works Best for You?
401(k) for Flexibility
You control contributions and can set one up through your practice. It’s a strong option if you want steady tax deferral with room to grow.
SEP IRA for Simplicity
You can open one with less paperwork. It works best if you don’t have employees. If you do, you must contribute the same percentage for them as you do for yourself.
Defined Benefit Plan for High Earners
If you want to put away six figures, this is the tool. Dentists nearing retirement often use it to save aggressively and cut down their taxes fast.
Smart Strategy: Layer Plans
You don’t have to choose just one. Many dentists combine a 401(k) with a cash balance plan. This setup lets you defer hundreds of thousands of dollars.
Example:
- $23,500 into your 401(k)
- Another $200,000+ into your cash balance plan
- Result: $220,000+ in tax-deferred savings in one year
That’s money you invest for retirement instead of paying to the IRS.
Action Steps for 2025
Review your current retirement plan.
Estimate your 2025 income.
Decide if upgrading or layering plans saves you more.
Work with a dental CPA to set up the right structure.
Start early—waiting limits your options.
FAQs
- How does a retirement plan lower my tax bill?
Your contributions reduce taxable income. For example, if you earn $400,000 and put $100,000 into a plan, the IRS only taxes you on $300,000. - Can I have more than one retirement plan?
Yes. Many dentists use both a 401(k) and a defined benefit plan for maximum savings. - What if I have employees?
You must include them in most retirement plans. A CPA can design a plan that works for you and keeps costs manageable. - How much can I realistically save in taxes?
High-income dentists often cut $50,000–$100,000+ from their tax bill by maximizing contributions. - When should I set up a new plan?
By year-end. The earlier you plan, the more flexibility you have.