Cash Balance Plans
Many Business Owners Reduce Their Taxes by $100k+
What is a Cash Balance Plan?
Cash balance plans are hybrid plans that allow greater contributions than a 401(k) or profit sharing plan while still maintaining the look of a defined contribution plan (e.g. 401(k), IRA, etc.). Cash Balance Retirement Plans may allow you to contribute as much as $418k a year in tax-deductible contributions. Because of this, Cash Balance Plans are one of the fastest growing retirement plan options in the United States.
Cash balance plans are ideal for business owners who are over 35, have fewer than 20 employees or sole proprietorship, and are looking to contribute $100k+ pre-tax to their retirement. Most clients who contribute to a cash balance plan not only secure a massive boost to their retirement plan savings but also secure an annual six figure tax reduction for their business.
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By the Numbers
*Annual Business Tax Reduction (Illustrative)
Max Annual Contribution (412e(3) Plan)
Max Guaranteed Retirement Benefit
How much can you save?
Why a cash balance plan?
Massive Tax Deductions
Each personalized plan is designed to provide the greatest tax deduction allowable. Many of our clients receive designs that exceed $160k in annual tax deduction during contribution years.
Potential Negative “Net Cost”
Due to the high tax savings from cash balance plans, they will often have a “negative net cost” to the business owner. Imagine having a net cost of $300k to contribute $420k to your retirement.
Catch Up To or Exceed Your Peers
The massive tax-deductible contribution limits of cash balance plans allow you to catch up on decades of underfunding your retirement savings in a matter of years.
Retain and Attract Top Talent
It can be tough to retain and attract top talent. Using a best-in-class benefit like cash balance plans give you an edge on your competitors while providing massive tax savings.
Lifetime Income (Optional)
For many doctors, the longevity caused by a healthy lifestyle can be one of the major risks to retirement savings. You can’t go back to work when you’re 91.
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Max Allowable Tax-Deductible Contributions by Age
Age | Max Annual Contribution | Illustrative Tax Savings* | "Net Cost" after Tax Savings |
30 | $72,994 | $29,197 | $43,796 |
35 | $93,461 | $37,384 | $56,076 |
40 | $119,720 | $47,888 | $71,832 |
45 | $153,427 | $61,370 | $92,056 |
50 | $196,715 | $78,686 | $118,029 |
55 | $252,321 | $100,928 | $151,392 |
60+ | $323,765 | $129,506 | $194,259 |
*Table used for illustrative purposes only and assumes max contribution limit. Estimated Tax Savings uses a 40% cumulative State and Federal tax rate. Contribution amounts vary and will be determined by an employee census. This is not intended as tax advice. Please consult a tax professional regarding your particular situation.
Who should consider a Cash Balance Plan?
Too many business owners are over paying on their taxes and under-contributing to their retirement because they don’t know their options. If you fit the criteria below, you should request a design to at least know your options. Don’t let Uncle Sam take what should be your retirement.
You should request a free cash balance design if you are a business owner who…
- Reducing taxes is a priority for you.
- You are maxing out your 401(k) or profit sharing plan and are looking for more.
- You are in your 40s, 50s, or 60s and don’t want the “2nd best” plan.
- You want to catch up or exceed your peer’s retirement savings.
- You are healthy enough that “living too long” might ruin your retirement.
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FAQ
What is a cash balance retirement plan?
A cash balance plan is a hybrid plan that allows greater contributions than a 401(k) or profit sharing plan will still maintain the look of a defined contribution plan. Rather than having a benefit that is defined as a series of payments as in a traditional defined benefit plan, the benefit in a cash balance plan is defined in terms of a stated account balance. Designing plans in this way, will often create the greatest tax-deductible contribution of all tax-advantaged retirement plans. Because of its tax-deductible contribution limits are best-in-class—as high as $416k annually—it is considered an ideal fit for doctors, lawyers, and other high earning business owners looking to maximize their annual tax deductions.
Each cash balance plan design is personalized to maximize your benefits, and may include a safe harbor 401(k), annuities, and even cash value life insurance to help secure your benefits and maximize your tax deductions. Speak to an expert to see how your plan can be design or see an example of an actual cash balance design here.
What determines how much I can contribute to my plan?
Your contribution amount is determined primarily by your age and your salary. The exact contribution amount is calculated using the plan formula and actuarial assumptions that ensure you get the largest tax deduction. We will often use your highest two or three years of salary to maximize your allowable contribution limits. To see a table of common contribution amounts and tax deduction estimates click here or to request your personalized design to see what your contribution amounts or tax deductions might be click here.
What determined how much I can save in taxes?
The IRS loves to make it complicated, but we will make it simple. The main factors that determine how much you can save in taxes is your contribution amount. Cash Balance Plans contributions are top-line tax deductions for your business (the best kind!). Your contribution amount is based on your age and current salary. From here, we use the required plan formula and actuary tables to calculate your max contribution. We’ll do that all for you. If you’re looking to learn how much you exactly could save, we recommend doing the free design. It’s free and will take you only a few minutes to submit the needed information. We take it from there and do all the calculations and hard math for you.
Is a cash balance plan a good option for me?
Cash balance retirement plans are ideal for individuals whose income exceeds the lower contribution limits of lower contribution plans, such as 401(k)s, IRAs, or Profit-Sharing Plans, and who are looking to maximize their tax deductions this year while securing their retirement. Most often, our clients who benefit the most from receiving a cash balance design are business owners, doctors, or partners who earn at least $150,000 annually, own a business, firm, or medical practice with strong and consistent cash flow, and are looking to maximize their contribution to their retirement plan or are looking for larger than average tax deductions.
Do you meet these criteria? Don’t miss out on saving tens or hundreds of thousands of dollars in taxes because you didn’t get your free design. Request your free design here or schedule a meeting at your convenience with an expert.
What is the first step in learning if it is a good plan for me?
For individuals who would consider reducing their taxes a priority, the first step would be to request an initial cash balance plan design. This will allow you to determine eligibility and look at what your tax deductions might be. Given the amount of taxes our clients can save each year, we highly recommend requesting a free plan design to see if you are eligible. To secure your plan design, you may either submit an online request form here or set up a consultation with an expert who will walk you through the process and answer any questions you may have. Schedule a free consultation with an expert.
I already have a 401k, SEP, or profit sharing plan in place. Can I still get a cash balance plan?
Yes. Your contribution amounts to other plans may impact how much you can contribute to the cash balance plan, but your total tax deductions offered by a cash balance plan will remain the same. Many of our clients incorporate a 401(k) into their cash balance design or use a cash balance plan to supplement what they already have and secure the next tier of tax deductions their other plan cannot reach. If you could reduce your annual taxes by as much as $160k, why wouldn’t you?
*Tax Rate Disclosure: Illustrative Tax Savings uses a 40% cumulative State and Federal tax rate with a maxiumum contribution 412e(3) plan. Please consult a licensed tax professional for your actual tax savings.