Cash Balance Plans to Increase Tax Deductions

A Great Plan for Increased Tax Deductions

Financial professionals can help business owner clients get larger tax deductions with something we like to call a Combo Plan, which is a combination 401(k) and Cash Balance strategy.

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Combination 401(k) Profit Sharing and Cash Balance plans can be a great benefit to many types of business owners, including partnerships, sole proprietorships, and S-corps. We’ve broken down some of these plan types by age and maximum contribution to help show the benefit opportunities.

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‍Click here for a downloadable version with additional details.

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What a combo plan does

The advantage of combining a Cash Balance plan with a 401(k) plan is that it provides employees with a higher level of retirement security and flexibility.

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The Cash Balance plan is designed to provide a steady stream of retirement income. The 401(k) plan is designed to allow employees to save and invest money for their retirement. Combine the two plans and employees have the opportunity to save more for their retirement and receive a guaranteed income stream in retirement.

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Another benefit of a Cash Balance combo retirement plan is that it allows small business owners to maximize retirement savings. They can contribute large amounts of money to retirement accounts while reducing tax liabilities. This can be especially beneficial for business owners who are approaching retirement and need to catch up on their savings.

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Not a one-size fits all solution

These kinds of combo plans are a bit more complex than the standard plan and different rules apply to different types of businesses and industries. Because of that, we recommend discussing options with a professional TPA to see what works best for your business or your clients.

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The Ryding Company, for example, offers complimentary customized plan design analysis to see if your clients are taking advantage of their deductions.

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This information is provided as general guidance and may be affected by changes in law or regulation. It is not intended as accounting or legal advice. If you have questions please reach out to our team.

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