Compelling Value Propositions


Accelerated Pre Tax Savings

Reduced Taxable Income

Asset Protection

Cash Balance Plans are a form of Qualified Retirement Plans. Cash Balance contributions are defined by a Lump Sum amount that is eligible to be saved by retirement age. Depending on the plan's Normal Retirement Age and the number of years the participant will be in the plan, this amount can exceed $2.5 million per participant. For individuals who may have deferred saving while building their business, a Cash Balance Plan may offer a meaningful way to accelerate savings. Cash Balance Plans can be implemented in conjunction with 401(k) and Profit Sharing Plans to maximize savings and tax benefits.

This solution is for professionals and business owners who are generally:
  • Paying significant taxes (typically $100,000 or more)
  • Consistently profitable with substantial annual revenues
  • At least 45 years old with significant income
  • Seeking to make sizable contributions
  • Committing to consistent annual contributions for at least 3 years
  • Maximizing 401(k) and profit sharing plan contributions
401k graph
 

*The maximum contribution is calculated independently for each individual, based on a number of factors and may vary significantly. A cash balance plan is more tax effective when owners are at least 10 years older than the youngest employees, and the bigger the disparity, the better.

Illustration

The two owners are ages 50 and 55. There is an allocation to their respective cash balance accounts of $102,000 and $141,000. The practice contributes 7% X $40,000 X by 8 = $22,400. The total tax deductible contribution for the owners is $256,400.

There is overhead: the employee funding costs of $22,400 and professional service fees include actuarial, record keeping, administrative, fiduciary, custody, etc. of $5,000.

The net economic benefit (net tax savings) to the owners is $60,142 which would otherwise be paid to the Internal Revenue Service as income taxes. The benefit exceeds the cost and the owners have significantly increased their retirement funds at the same time.

Participant
Age
Funding
Tax Savings (@33%)
Owner 1
50
$102,000
$33,660
Owner 2
55
$141,000
$46,530
All others (8)
40
$22,400
$7,392
Total Tax Deduction
$265,400
$87,582

 

Tax Savings @33%
$87,582 (265,400 x 33%)
Less part. funding cost
$22,400 (40,000 x 8)*7%
Less est. prof. fees
$5,000
Net Tax Savings
$60,182

 

Bell Rock Capital, LLC is an SEC Registered Investment Advisor. We utilize proprietary research as well as technology-driven investment tools to manage accounts and conduct fundamental and technical analysis on the companies we consider before investing. The Company has established relationships with top tier partners to deliver institutional caliber, cost efficient retirement plan options that are customized to the needs and objectives of the client.

Did You Know?*

  • You will need approximately 60-80% of your income to live comfortably through retirement?
  • You could contribute as much as $18,000 per year in a 401(k), while your IRA is $5,500 per year?
  • A self-employed owner can contribute as much as $53,000 per year?
  • Contributing to a qualified retirement plan lowers your taxable income?
  • A Roth option is available within a 401(k)?
  • Automatic deferral increases are available for employees?
  • The Plan Investment offerings should be diverse and have multiple managers?

*Sources: Bell Rock Capital and IRS guidelines.