With income taxes on the rise, it’s time to revisit all legal options for reducing those taxes. One option available to those earning in excess of $205,000 (i.e. high-income earners) is the cash balance pension plan. The goal is typically to maximize contributions for the owners/partners who pay the highest rates.
In a 401k plan the most you can save in 2013 is $51,000 (inclusive of all deferrals, matching, and profit sharing contributions). For high income employees this is not nearly enough savings to maintain their lifestyle in retirement.
You must save more.
A Cash Balance Plan let’s you save significantly more. How much?
A rough calculation tells us that a 52-year-old (earning the maximum compensation under current pension law) could save about $170,000, or more–annually–in an IRS approved tax-deferred account.
How much you can ultimately save depends on the makeup of your company, the employees, their compensation and their ages. To get a firm idea, we must first gather some census data and develop an illustration.