The 401(k) is the most common retirement plan because of the available features and customizability to each business. Both the employer and its employees can make contributions and receive tax savings for doing so. Each participant’s account value is based on how they invest their money. The 401(k) is a great plan for most businesses.

Rising tax bills have many business owners looking for additional tax savings. High-profit business owners often want to contribute more than a 401(k) allows. Many plan participants want more predictable retirement income than a volatile 401(k) account provides. In all these cases, a business can add a Cash Balance Plan to meet those needs.

Cash Balance Plans are increasingly popular because these hybrid plans offer the best features of 401(k) and pension plans. Cash Balance plans can provide significant security by offering a fixed lifetime income at retirement. Because they allow the highest contribution limit of any plan, business owners can receive massive tax savings each year while building wealth. Since the company chooses which owners and employees participate, these plans are great for attracting new recruits and incentivizing existing staff. Cash Balance Plans are typically combined with a 401(k) plan for optimal savings and flexibility.

Case Study – Dr. Smith and Dr. Ferguson are partners in a specialty medical practice and start a 401(k) soon after they open for business. Their retirement plan helps them keep employees happy and allows both partners and employees to build wealth and save taxes. However, as the business grows, they find themselves paying substantial tax bills that make saving for the future challenging. They learn about the tax savings offered by Cash Balance Plans and start one for their company. They include themselves and several key employees in the plan. Dr. Smith and Dr. Ferguson are ecstatic to each save over $100,000 in taxes every year. They also feel more secure now that they’re building a predictable income stream in retirement.

Small businesses choose a 401(k) when owners want to:

• Contribute $73,500 or less to their retirement account each year
• Broadly retain and recruit employees
• Provide a plan for owners and employees to save taxes and build wealth over time

Small businesses upgrade to a Cash Balance Plan when owners or other key employees want to:

• Save more than $50,000 in taxes each year
• Quickly build wealth in an account separate from their business

Receive a fixed retirement benefit with a guaranteed rate of return