Maxed Out 401(k)? Why Some Owners Look at a Cash Balance Plan

Maxed out 401(k)? For some owners, regularly reaching both yearly 401(k) limits may be a sign to look closer at a cash balance plan. We walk through three common signs you may have outgrown your 401(k). Episode 9 of Cash Balance Plans 101 from Emparion. Learn more: https://www.emparion.com/?utm_source=... The three signs, in short. Regularly reaching the yearly 401(k) limits, feeling behind and wanting to save more, and wanting larger tax-deductible contributions than a 401(k) alone allows. These are common signs, not an official list, and a sign is a reason to look closer, not a decision. Made for business owners, physicians, dentists, attorneys and other professionals. CPAs and financial advisors: feel free to share this series with clients who ask about cash balance plans. In this video: 0:00 Welcome back: what outgrowing a 401(k) means 0:30 Sign 1: Regularly reaching the yearly 401(k) limits 1:08 Sign 2: Feeling behind and wanting to save more 1:27 Sign 3: Wanting larger tax-deductible contributions 1:54 Keep in mind: a long-term commitment 2:21 The key message: generally not replacing the 401(k) 2:46 Recap of the three signs 3:00 A sign, not a decision: finding the right fit 3:22 Age and income, and what's next Questions answered in this video: What does it mean to outgrow a 401(k)? In this video, it means the 401(k) may no longer let you save as much as you want. What does maxing out a 401(k) mean? A 401(k) has two kinds of yearly limits, set by law: one on what you put in from your pay, and one on the total going into your account, including money the employer adds, like profit sharing, where the plan has it. Once you reach both, a 401(k) alone may not let you put in more. Sign 1 means regularly reaching both, not only the limit on what you put in from your pay. What if an owner regularly reaches both limits? For some owners, that may be a sign to look closer. A cash balance plan may allow more savings, within its own limits. What if an owner feels behind on retirement savings? For some owners, that may be a sign to look closer. How much can go into a cash balance plan depends on things like age, income and plan design. Can a cash balance plan allow larger tax-deductible contributions than a 401(k) alone? For some owners, it may, depending on age, income and plan design. Benefits are generally taxed when paid out, so the tax is deferred, not erased. This is general education, not tax or legal advice. Does a cash balance plan replace a 401(k)? Outgrowing a 401(k) generally doesn't mean replacing it, and reaching its limits isn't a problem with your 401(k). Can you have a cash balance plan and a 401(k)? A cash balance plan can often sit alongside a 401(k). Rules connect the two, and in some cases a combined limit on deductions can apply, so they should be designed together. Does a cash balance plan require yearly funding? There is a yearly funding requirement, and the required minimum can change each year. These plans are a long-term commitment, not a short-term tax move. If an owner has one of these signs, is a cash balance plan right for the business? Not necessarily. Having one, or all three, doesn't mean a plan is right for a business, and the signs aren't requirements. Finding the right fit takes a proper analysis with specialists, like a plan administrator, an actuary and your own tax advisor. Cash Balance Plans 101 | Module 2: Who It's For Module 2 playlist:    • Cash Balance Plans 101 | Module 2: Who It'...   New to the series? Module 1 playlist:    • Cash Balance Plans 101 | Module 1: The Basics   Episode 7: Cash Balance Plan for Business Owners: Who Is the Ideal Candidate?    • Cash Balance Plan for Business Owners: Who...   Episode 8: Cash Balance Plans and Professional Practices: What Makes a Fit?    • Cash Balance Plans and Professional Practi...   Episode 9: Maxed Out 401(k)? Why Some Owners Look at a Cash Balance Plan (this video) Next: Episode 10, Why Age and Income Matter So Much    • Cash Balance Plan: Why Age and Income Matt...   Learn more, or see whether a cash balance plan might be right for your business: https://www.emparion.com/?utm_source=... About Emparion Emparion is a third-party administrator (TPA) that specializes in cash balance plans and defined benefit plans, and we help business owners design and run their plans. Emparion is a TPA, not the investment custodian. We do not hold or invest plan money. Disclosures This video is general education, not tax, legal or investment advice. Any examples and visuals are illustrative only. How a specific plan works depends on its plan document, and tax results depend on your own situation, so talk with your own tax, legal and financial advisors before making decisions. #CashBalancePlan #401k #RetirementSavings