Cash balance plans allow six-figure annual contributions

Cash Balance plans can help high-income earners build substantial retirement savings in a relatively short amount of time, but they're not for everyone.

Most people can contribute to their 401(k) without worrying about exceeding the annual contribution limit. If you're under 50 years old, that's $18,500 a year. If you're 50 or older, it's $24,500.

A small, but important segment of the population, though, has the ability to contribute significantly more to their retirement account. For some, a profit-sharing plan combined with a 401(k) raises the saving limit to $60,000. But if you're looking to save even more on taxes or put more into a retirement account, a cash balance plan may be the right choice since it offers the opportunity to contribute significantly more to your retirement account each year.

Cash balance plans can help high-income earners build substantial retirement savings in a relatively short amount of time, but they're not for everyone. Unlike profit-sharing plans with discretionary contributions, cash balance plans do require mandatory annual contributions. That tends to favor business owners with an income that's substantial and predictable from year-to-year. These plans are considered a hybrid between a Defined Benefit plan and a Defined Contribution plan. Like many plan designs, they have their own jargon and complexities that sometimes get in the way.

Once you understand the basics of cash balance plans, we think you'll appreciate the significant retirement savings and tax mitigation this plan design can provide in the right situation.

Business owners like you can take advantage of a cash balance plan to quickly make up a retirement shortfall in a tax-efficient way. This can be especially helpful if you're close to retirement age.

For example, a 50-year-old could contribute more than $143,000 annually to cash balance plan. A 60-year-old could contribute more than $235,000. The actual amount depends on your income and age.

You can also pair a cash balance plan with your traditional 401(k) to reward key executives and provide even more plan design flexibility.

Questions?

Contact Brad Bechtel using the information below f you're intrigued by the potential of a cash balance plan. Let's chat and see if your situation and goals might be a good fit.

Brad Bechtel

Senior Vice President
Employee Benefit Services

Brad Bechtel leads AGH’s employee benefit services (EBS) division, which serves clients nationwide. EBS is one of the region's largest providers of retirement plan recordkeeping services for daily valuation plans. The division provides consulting services to clients on employee benefit plans, including plan design, implementation, operation, fiduciary due diligence, compliance, and through affiliate AGH Wealth Management, discretionary and non-discretionary investment fiduciary services, investment advisory services and employee education.

Bechtel is experienced in executive compensation, including non-qualified, phantom stock, top hat and excess benefit plans, as well as other deferred compensation approaches. He has consulted for numerous Fortune 500 corporations on investment management and fiduciary due diligence. He also provides search and selection due diligence consulting services for companies seeking new investment and recordkeeping providers for their qualified plans. Bechtel is a registered investment advisor who holds Series 7, 24 and 66 FINRA registrations, and he is a member of the American Society of Pension Professionals & Actuaries.

Do you have 24/7 access to participant information and a direct line to customer support?
See how our recordkeeping services are different.