Cash Balance Plans

[Pacman27]

Any of you guys that have your own practice. Are you guys familiar with cash balance plans for tax sheltering purposes


I have a 401 guy pitching pretty hard and just wanted your thoughts on it

You can PM as well

Thanks

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[deleted185747]

Are you talking about whole life insurance with cash value? Don't do it. Hefty commissions are almost 50% of your premium for the first 2 years, cash value is less than inflation, cost to borrow your own money has to be paid back to self. The more expensive a product is (higher commission) the harder the pitch.

If you are talking about a deferred compensation plan along side your 401K then its not as bad, but an expensive annuity nonetheless.

 

[lonelobo]

Any of you guys that have your own practice. Are you guys familiar with cash balance plans for tax sheltering purposes


I have a 401 guy pitching pretty hard and just wanted your thoughts on it

You can PM as well

Thanks

I have a cash balance/ 401k plan( think stim) just recently started one. For smaller to mid sized practices this can be your biggest savings option and most significant tax saver. You would need to work with a 3rd party administrator ( I use Kidder)

 

[deleted185747]

Third party administrators (TPA) including the audits are usually over 1%. Considering an average return of 7%, you are giving up 14% of future earnings for this service alone. Other fees will decrease your future balance by as much as 20-25% which is not insignificant if your plan has a few million in it after 30 years.

Do what I did; roll the 401k money into a traditional-roll-over IRA at scottrade.com
Buy VUG, an ETF with dirt cheap fees (way lower than mutual fund or 401k fees) that matches the Dow
I have my accountant take $692 out of my bimonthly paycheck for accounting purposes as this is a before-tax deduction, and I have my bank automatically send a check to my scottrade account. I receive an email alert when the market is oversold and then I buy more VUG with whatever cash is in the account.

 

[lonelobo]

The

Third party administrators (TPA) including the audits are usually over 1%. Considering an average return of 7%, you are giving up 14% of future earnings for this service alone. Other fees will decrease your future balance by as much as 20-25% which is not insignificant if your plan has a few million in it after 30 years.

Do what I did; roll the 401k money into a traditional-roll-over IRA at scottrade.com
Buy VUG, an ETF with dirt cheap fees (way lower than mutual fund or 401k fees) that matches the Dow
I have my accountant take $692 out of my bimonthly paycheck for accounting purposes as this is a before-tax deduction, and I have my bank automatically send a check to my scottrade account. I receive an email alert when the market is oversold and then I buy more VUG with whatever cash is in the account.

The point of Cash Balance plan is not to maximize initial returns. The main advantage of Combo Cash balance/401K plan is a tremendous tax saving strategy for high income earners.
401K only is not going to allow you to put away $150K pretax

http://whitecoatinvestor.com/new-to-the-blog-start-here/

 

[deleted185747]

I have been a fan of whitecoatinvestor for a while now. The link is broken, which section references cash balance plan? Is there another name for this plan?

 

[lonelobo]

http://whitecoatinvestor.com/cash-balance-plans-another-retirement-plan-for-professionals/


try this one

 

[Stim4me]

http://whitecoatinvestor.com/cash-balance-plans-another-retirement-plan-for-professionals/


try this one

yes lonelobo advised me of new rules which allow more tax deferred benefits with a 401/defined benefit plans. I thank you for that.... just remember after 4-5million range you need to move back to a pure 401k plan. if you staff is younger than you I would switch soon.