The retirement plan services team was recently brought in by an advisor to help a business owner defer as much in taxes as possible. He (68) and his wife (64) own a real estate development company and make around $500,000 a year. We explained the benefits of a 401(k) working in conjunction with a cash balance plan.

A cash balance pension plan is a tax-deferred (qualified) retirement plan that provides an alternative means of potentially accelerating retirement savings with the benefit of tax deductibility. A cash balance plan is attractive because contributions are tax deductible to the sponsoring entity, and investment earnings grow tax deferred until withdrawn. In addition, significant potential deferral allowances make cash balance a powerful income deferral tool.

When business owners combine a cash balance plan with a 401(k) profit-sharing plan, pre-retirement savings amounts have the potential to be significantly increased. In the case of this couple, they were able to shelter close to $300,000 each into qualified accounts. Talk about a powerful tool to help the clients defer taxes and fund their retirement.

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