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Cash Balance Plans Offer Potential Large Tax Deduction

Planning Retirement Business Ownership Scott's Thoughts

By: Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIF®, CRPS®, CMFC®,  AWMA®

Please click here to download or print.

If you own a business and are looking for a potentially large 2022 tax deduction, it is not too late to see if you are eligible to setup and fund a 2022 Cash Balance Plan in combination with your existing 401(k).

If you meet the following criteria, you may be a candidate for a Cash Balance Plan:

  1. Small professional firm with high annual cash flow.
  2. Owner(s) are older (and at least age 50) than average age of employees.
  3. Owner reports over $500,000 in annual earned income or w-2 wages.
  4. Owner has maxed out 401(k) plan, if existing.
  5. Willing to contribute 5 – 8% of employees’ income (sometimes covered in full by tax savings!).

A Cash Balance Plan is a great solution to help you:

  • Reduce your taxes
  • Max out your annual retirement funding (potential up to $245,000 in addition to your 401(k))
  • Put money into a federally asset protected retirement plan (i.e., retirement plans are safe from claims by other people)
  • Reward, recruit, and retain your employees with an enhanced benefits package

You have until your 2022 tax return due date with extension to setup and fund a 2022 plan. This deadline is either:

  • September 15, 2023, if you are a partnership or S-Corp

OR

  • October 15, 2023, if you are a C-Corp

Let us run a complementary illustration to see if this is right for you. Please give Scott Van Den Berg, or your Wealth Advisor, a call today!

Disclosures: Century Management Financial Advisors is an independently registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario. This information is not intended to be tax advice. Please consult legal or tax professionals for specific information regarding your individual situation. A full description of our Firm’s business practices, including our Firm’s investment management services, wealth and retirement plans, and advisory fees, are supplied in our Form ADV Part 2A and/or Form CRS.    CM-23-02