118:Dental Financial Planning: Turning Chaos into Financial Freedom - Part 8

In this episode of The Dental Boardroom Podcast, host Wes Read, CPA CFP®, continues the financial planning series for dental practice owners by focusing on a critical phase three step: determining your payroll (W-2 income) as an S-Corp owner.

Wes explains how payroll fits into your broader business financial plan, why it matters for tax efficiency, and how it interacts with retirement plan strategies like 401(k)s and defined benefit plans. You’ll learn when to keep your W-2 lower to save on FICA taxes, and when to raise it to maximize retirement contributions and long-term wealth building.

What You’ll Learn in This Episode:

• The five-step sequence of financial planning for dental practice owners.
• Why S-Corp owners must pay themselves a W-2 salary and how the IRS views it.
• The relationship between W-2 income, K-1 distributions, and taxable income.
• How different retirement plan strategies (solo 401k, Roth 401k, profit share, defined benefit) affect payroll decisions.
• The three funding “buckets” in a 401(k): elective deferral, safe harbor, and profit sharing.
• Why Roth 401(k)s are powerful for building a tax-free retirement bucket.
• Guidelines for setting W-2 payroll:
• No retirement plan: Keep W-2 as low as possible ($75K–$100K minimum).
• Basic 401(k) without profit share: Stay around $100K–$125K.
• 401(k) with profit share and defined benefit plan: Increase W-2 up to IRS maximums (~$350K in 2025).
• The benefits and costs of defined benefit plans—and why they can be worth it for high earners.
• How “tax diversification” (tax-free, tax-deferred, taxable buckets) increases long-term flexibility and savings.