Adding a Cash Balance plan to a 401(k) Profit-sharing plan currently in place can allow owners to invest significantly higher contribution limits.
This illustration is common for what we see for a small business. In this scenario the business has two owners (a husband-and-wife couple) along with four additional employees.
The owner wanted to make the maximum allowable Cash Balance contribution for her age (68) which results in a total contribution, including the 401(k) profit sharing plan, of $562,861. The Cash balance contribution largely depends on profitability and only a 7.5% of pay contribution for all other employees is required.
This allows this married couple to save nearly $253,000 in taxes.
Do you have clients or prospects looking to accelerate retirement savings and reduce their tax burden? To receive a Cash Balance Overview with one of our dedicated FuturePlan Cash Balance experts, fill out this quick form here.
Retirement Plan Illustration – 2023
Results shown may require plan amendments to the 401(k)/profit sharing plan before the plan year end.
*Assuming a 45% tax rate; taxes are deferred only.
Plan designs are for illustration purposes ONLY. Contribution amounts are subject to change based on final year-end census data. If company is a Corporation, an S-Corporation or an LLC taxed as a corporation, owner(s) compensation listed above must be reported on Form W-2.
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This sample is for illustrative purposes only.