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In this episode, Corey and Rachelle breakdown cash balance retirement plansWhat are they and are they a good fit for you? 

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What the heck is a cash balance plan? 

  • Another pre-tax retirement plan, meaning you do not pay taxes on the money you deposit now, but you do pay taxes on withdrawals in the future. 
  • Many pre-tax retirement plans are defined contribution plans (401k, IRA, SEP) meaning that there is a specific contribution amount. 
  • Cash balance plans are different because the goal is to provide a “defined benefit” similar to an old-school pension. 
  • Many people terminate the plan and roll the balance into an IRA instead of using them like a pension. 

You can potentially put a LOT of money into them, but you can’t set them up just anywhere.  A cash balance plan may be a good fit for you if: 

  • You are self-employed and want to contribute more to retirement than the IRS plan maximum for a 401k or SEP IRA. 
  • You are a business owner who wants to contribute more to retirement AND you don’t mind setting aside some funds for your employees as well. 

There are lots of rules with these and costs as well.  It can be a great way to save a lot of money for retirement while saving on taxes, but proceed cautiously and learn as much as you can first. 

For more financial planning tips from Corey and Rachelle, find them on social media!
LinkedIn: @CoreyJanoff and @RachelleVanderzanden; Instagram: @CoreyJanoff and @VanderzandenRachelle; and Twitter: @CoreyJanoffCFP and @RachelleFinance