Cash Balance Plans

Reduce your personal taxes. Increase your personal savings.

A Cash Balance Plan can be a good retirement savings vehicle for owners of successful businesses with steady revenue. While there are certain risks to consider, participants can expect benefits that other retirement strategies can’t offer—including significant tax reductions and accelerated savings.

WHAT IT IS

A Cash Balance Plan is an IRS-qualified Defined Benefit retirement plan that can help business owners realize tax deductions and savings rate up to 4x greater than a 401(k) plan alone.*

*Assumes annual 401(k) maximum contribution of $18,000; $6,000 catch up; $35,000 profit sharing

How does a 401(k) Cash Balance Plan work?

A Cash Balance Plan is used in combination with a 401(k) Profit Sharing Plan in order to maximize retirement savings and tax deductions for business owners. Unlike a 401(k) plan, all assets within the Cash Balance Plan come from the employer, assets are pooled and investments are employer-directed and employer-guaranteed.

WHY IT MATTERS

For many successful business owners, the contribution limits of a 401(k) alone may not be enough to achieve retirement savings goals. Adding a Cash Balance Plan can help.

Employees benefit too with a guaranteed company contribution to their retirement account.

If you're relying on your 401(k) alone, you could be missing out on larger tax deductions and accelerated retirement savings. Depending on your age and retirement goals, you could save as much as $144,000 on your taxes every year* with an IRS-qualified Cash Balance Plan for businesses.

retirement plan contribution limits for 2016

Age
401(k) with Profit Sharing
Cash Balance
Total
Tax Savings*
Age

70

401(k) with Profit Sharing

$59,000

Cash Balance

$303,000

Total

$362,000

Tax Savings*

$144,800

Age

65

401(k) with Profit Sharing

$59,000

Cash Balance

$245,000

Total

$304,000

Tax Savings*

$121,600

Age

60

401(k) with Profit Sharing

$59,000

Cash Balance

$235,000

Total

$294,000

Tax Savings*

$117,600

Age

55

401(k) with Profit Sharing

$59,000

Cash Balance

$180,000

Total

$239,000

Tax Savings*

$95,000

Age

50

401(k) with Profit Sharing

$53,000

Cash Balance

$137,000

Total

$190,000

Tax Savings*

$76,000

Age

45

401(k) with Profit Sharing

$53,000

Cash Balance

$105,000

Total

$158,000

Tax Savings*

$63,200

Age

40

401(k) with Profit Sharing

$53,000

Cash Balance

$80,000

Total

$133,000

Tax Savings*

$53,200

Age

35

401(k) with Profit Sharing

$53,000

Cash Balance

$61,000

Total

$114,000

Tax Savings*

$45,600

*Assumes a 40% tax bracket. Source: IRS 2016 Plan Limits.
Cash Balance Plan Options
A Cash Balance plan may be a good fit for you if:
  • You are seeking to reduce your annual taxable income by $50,000+
  • You want to significantly increase the rate of your retirement savings
  • Your business produces a steady revenue
  • Your annual income is $250,000+
  • Your business has fewer than 15 employees per owner

To learn more, download our preview guide to Cash Balance Plans, or you can talk to our Cash Balance Plan Specialists at 844-343-4015.

WHY ARE CASH BALANCE PLANS SO popular?

  • Taxes: Many business owners and partners feel they are paying too much in income tax. A cash balance plan allows them to put more into retirement than a traditional 401(k) plan, reducing their taxable income.
  • Combo: A Cash Balance Plan works best when combined with both a 401(k) and a profit Sharing Plan – allowing for business owners and employees to save more toward retirement.
  • Qualified: This is an IRS-qualified Defined Benefit retirement plan.
  • Retirement Savings: Americans aren’t ready for retirement and the Boomer generation feels it the most as they approach retirement age. Cash Balance Plans allow older business owners a way to accelerate their personal retirement savings.

Cash Balance Plan growh year over year

 

Kravitz 2015 National Cash Balance Research Report