Articles Tagged ‘Cash balance plans’

Small business owner: Use cash balance plans to increase retirement savings

Friday, June 3rd, 2011

Cash balance plans are defined benefit plans (pensions) that appear to the participant as being account balance based. Participants receive an annual statement displaying the amounts in their account, along with the amount the employer is crediting to them for the current year.

These plans are particularly useful for small business owners who need to accumulate a significant amount of retirement savings in a short period of time. If the owner needs to accumulate over $45,000 per year (the 2011 annual limit for defined contribution plans), has a steady cash flow, and is already providing a 401(k) benefit to employees, a cash balance plan may be the solution.

Depending upon demographics, a contribution of up to $200,000 could be attained for the owner, which could accumulate to over $2,000,000 in a cash balance account Other employees would also receive a contribution, but generally speaking they may only be 10%-20% of the total contribution to the plan.

Charles Munsell

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