Any business can establish a Cash Balance Plan, including sole-proprietorships, partnerships, corporations, and other types of entities. Cash Balance Plans are most suitable for highly profitable businesses with stable cash flow.
With the right demographics, contributions between $100,000 and $200,000 for owners or high-compensated employees can be made. All contributions are fully deductible to the business for federal income tax purposes.
Cash Balance Plans work best when combined with 401k Plan. This provides for flexibility to the employees and employer in funding contributions yet allows for maximum contributions. Owners and highly compensated employees may be able to receive $50,000 plus in the 401k plan plus contributions ($100,000+) in the Cash Balance Plan.
A properly designed Cash Balance Plan implemented can be a great retirement savings plan, but it has risks that should be evaluated carefully before implementing.
Several actuarial factors can cause contribution amounts to fluctuate from year-to-year:
A Cash Balance Plan can help you accelerate saving for retirement while reducing current tax liability, but it’s not for everyone. A Cash Balance Plan may be a good fit if you meet this criteria:
If your needs and abilities align here, contact us or your financial advisor to see a customized illustration of how a Cash Balance plan can help you achieve your goals.