What Financial Advisors Should Know About Retirement Plan Tax Savings

Retirement plan tax savings represent one of the most powerful and underused planning levers in your client conversations. As their financial advisor, you should be aware of all the tax savings opportunities available to your clients. This isn’t a one-time recommendation; it’s a recurring touchpoint that should be regularly discussed.

In this article, we’ll teach you about how to position the savings to your clients, who benefits most, and how it can fit with broader tax planning.

How Advisors Can Position the Retirement Plan Tax Conversation

The tax case for a workplace sponsored plan is strong, but advising on it well requires knowing which clients to speak with, how to frame the math, and how it interacts with the rest of their planning. Follow these key steps to better position retirement tax savings to your clients:

• Identify the Right Client: Target profitable owners with no current plan, recent incorporations or windfall years, high-earning solo practitioners, and pass-through owners.
• Frame the Cost-Benefit Conversation: Net cost vs. after-tax value of the alternative; SECURE 2.0 credits offsetting admin cost in early years.
• Match Plan Type to the Tax Goal: Quick positioning of traditional 401(k), SEP, solo 401(k), DB/cash balance, and designated Roth against different client tax goals.
• Coordinate With Entity Structure and Owner Compensation: Present how S corps, partnerships, and sole proprietorships can affect retirement contributions and owner compensation, and when to loop in a client's CPA.
• Sequence the SECURE 2.0 Credits: Timing decisions around the 50 and 100 employee thresholds.
• Explain Roth vs. Traditional as a Planning Decision: Walk clients through current vs. expected future tax brackets, time horizon, and overall retirement income strategy.
• Flag Potential Tax Issues: Advisor-specific watch list, §404 deduction limits, controlled/affiliated service group rules, top-heavy and ADP/ACP failures, and missed funding deadlines.

When all these ideas are used together, these levers turn a generic retirement recommendation into specific, defensible advice tied directly to a client's tax position.

When Advisors Should Bring Up the Tax Savings Conversation

Tax-savings conversations typically land best when tied to something already happening within the client’s year. Build these recurring moments into your calendar:

• Year-End and Q4 Planning: Plan establishment deadlines, like Q4 as the natural window for deduction-driven conversations.
• Post-K-1 or Tax-Return Review: The spring window when clients see their tax bill and are most receptive to deduction strategies.
• Liquidity and Transition Events: Sales, distributions, equity events, and revenue spikes — concentrated tax years where DB/cash balance plans can absorb meaningful deductions.
• Hiring and Headcount Milestones: Credit eligibility shifts at 50 and 100 employees; surface the timing call before headcount changes the math.
• Existing Plan Reviews: Annual reviews to revisit plan type, contribution structure, and Roth elections against current bracket and entity structure.

Helping Clients Navigate the Decision

Tax conversations around retirement plans aren't one-time pitches. They require recurring touchpoints that show up at year-end, after a K-1 review, or whenever a client hits a liquidity event or hiring milestone. Advisors who bring this conversation proactively tend to deepen client relationships and surface adjacent planning opportunities that transactional engagements miss. Paychex supports advisors at every stage of this process, from plan implementation and ongoing administration to compliance support that keeps your clients' plans running smoothly. Contact a Paychex rep today.