Strategy 01
Cash Balance Plans
A defined-benefit retirement plan structured with hypothetical account balances.
Discuss this strategyWhat it is
A cash balance plan is a defined-benefit plan that looks and reads like a defined-contribution plan. Each participant has a hypothetical account credited annually with a pay credit (a percentage of pay or a flat dollar amount) and an interest credit. The promised benefit at retirement is the value of that hypothetical account, but the plan itself is funded on an actuarial basis like any other defined-benefit pension. Because the contribution is age-weighted and actuarially determined, owner-operators in their 40s, 50s and 60s can often deduct contributions far in excess of standard 401(k) and profit-sharing limits.
Who it is for
Profitable owner-operators with stable cash flow who want to compress 10 to 20 years of retirement saving into a shorter window. Typical fits are professional service firms, established pass-through businesses, and high-margin closely held companies where the owner is willing to fund staff benefits as part of the design.
Related strategies
Three strategies that travel with this one.
Strategy
Entity Optimization
Structuring business entities (S-corp, C-corp, LLC, partnership) for optimal tax treatment.
Strategy
Income Shifting
Legally redistributing income across family members or entities to lower aggregate tax exposure.
Strategy
Charitable / Trust Planning & Other Advanced Strategies
Donor-advised funds, charitable remainder trusts, dynasty trusts, and related estate-and-tax planning structures.
Next step
See whether this strategy fits your facts and circumstances.
The first call is fact finding only. We tell you whether this strategy belongs in your plan, and what would have to be true for it to apply.
Book a strategy call