If you are self-employed with high income, and if you are a little behind on retirement planning, you should consider a Cash Balance Pension Plan.
In America, the average retirement savings balance for people between ages 50 and 55 is just under $125,000 and the median savings amount for this group is just $8,000.
Even if your household matches that average of $125,000 in savings, it means about $417 per month as retirement income (based on a 4% withdrawal rate). Even with Social Security, it will be a daunting task to get by.
Are you serious about retirement savings?
Many small business owners use SEP IRA or SOLO 401(K) for retirement contributions. This is not such a great option for people with higher incomes, who need more tax breaks. If you are falling behind in your retirement planning, you may need a little more help and a cash balance plan may be the solution for you.
If you are a high earning business owner, who is already maxing out your 401(K) account, you can put away even more money as well as save a great deal of money on taxes. With the Cash Balance Plan, also known as the DB Plan, Defined Benefit Plan, or Personal Pension.
What is a Cash Balance Plan?
The Cash Balance Pension Plan can provide you with a specifically defined income benefit at retirement, like a monthly payout similar to Social Security or a pension which provides lifetime income. To fund these future benefits, business owners can contribute considerable amounts of money to the plan now to fund future benefits. Since it is meant to encourage people to save for retirement, the contributions are tax deductible.
Cash Balance Plan Contributions
The contributions you make to the Cash Balance plan depend upon your age and compensation, compared to the limited contributions you can make to the 401(K). An additional $6,500 is allowed for those over the age of 50, as catch up contributions. Once you have maxed out your 401(K), a cash balance plan can help you minimize taxes and maximize retirement account balances.
You can potentially benefit the most from Cash Balance Plans, if you are a –
- Business owner with steady profits
- Entertainment industry professional your own corporation, like Director and Producer
- Professional, like lawyer, physician, CPA
- Business owner, wishing to catch up retirement accounts and save taxes
- High-income husband and wife businesses
- Business owner with large amounts in taxable accounts
If you are looking for a retirement income for life in Orange County, CA, consult retirement plan specialists, Tax Advantaged Retirement Specialists or call 442-400-3522. Tax Advantaged Retirement Specialists help you reduce your taxes during retirement, and create tax-advantaged income from ROTH IRA's and Life Insurance with IRS compliant strategies. Their mission is to provide strategies and products to achieve client’s retirement goals and dreams.