Cash Balance Plans: An Introduction - YouTube

What if you could save over $200,000 extra dollars this year in 2019 and get a

tax deduction for it. In today's video,

I'm talking about what I think is the best kept secret in the retirement plan

industry, the cash balance plan.

These plans have absolutely exploded in popularity since about 2006 when the US

government,

Uncle Sam clarified the rules on these plans and with the tax cuts and jobs act

especially, they're even more compelling. So in today's video,

I'm going to talk about that sort of cash balance plans one-on-one.

I'm going to give you an overview so that you can understand what these plans

are, how they work, and who they are appropriate. Fourth,

you can decide if this type of plan is right for you.

Hi there. My name is Ashley Micciche,

CEO of True North Retirement Advisors where we specialize in retirement and exit

planning for business owners.

CASH BALANCE PLANS - AN INTRODUCTION

okay, so let's talk about the cash balance plan. Now, honestly,

I go to a lot of clients. First of all, they,

most clients who are business owners,

they've never heard of a cash balance plan.

Their CPA is not telling them about this.

Their financial advisor they had before wasn't telling them about this.

Nobody is talking about the cash balance plan. It's sort of this, um,

I don't know. It's a best kept secret they had.

They have not been around for nearly as long as the 401k plan. And frankly,

I think a lot of people just start keeping up with them.

A lot of industry professionals who work,

who don't want to specialize or have a background in 401k or profit sharing

plans have absolutely no clue what these plans are. And as a result,

a lot of businesses haven't really adopted them because they just haven't been

aware of the opportunity. But the opportunity is incredible.

If you are a successful business owner,

you're over 50 your business is profitable,

you pay way too much in taxes, you want to reduce your tax bill. By the way,

that's the number one reason why a business owner will adopt these plans is

because of the significant tax benefits,

which I'm going to talk about in more detail in the video two weeks from today.

So come on back to that video, which is part two of this four part series.

There's the cash balance plan allows you to sort of kill two birds with one

stone.

It allows you to accelerate your retirement savings way above and beyond what

you could do in the 401k plan, in the profit sharing plan.

And it allows you to get a significant tax deduction for those higher savings

amounts. So here's how it works. You, uh,

a cash balance plan is a hybrid retirement plan.

So it has elements of defined contribution plans, which are, um,

401k profit sharing plans.

And then it also has elements of pension plans or defined benefit plans.

And it kind of straddles the line between the two.

And the reason why this is important is because a cash balance plan is a

qualified retirement plan. And because it's a qualified retirement plan,

there are certain rules and restrictions with it.

But as long as you follow the rules,

you received a absolutely massive tax deduction for doing so.

You want to implement a cash balance plan unless you already had a 401k and a

profit sharing plan. So assuming those two are in place,

you're going to add a cash balance,

but it doesn't replace the other plan you added to the mix.

And so you can see on the chart here that after you maximize your 401k

contributions matching dollars and after you maximize the profit sharing

contribution,

you still want to contribute more and you still want a big tax deduction.

Enter the cash balance plan. And you can see here in the chart,

it's based on the contributions that you can make to the cash balance plan or

based on your age. So the older you are, the more you can contribute.

But look at the additional amount of money that you can put in to the your

retirement accounts for that given year and get a tax deduction so you can see

what, how massive those tax savings potentially are.

If you're fully utilizing your 401k,

your profit sharing plan and your cash balance plan all in conjunction with each

other. And this is where the incredible opportunity lies,

is that when you sort of bring together all three of these plans and maximize

those contributions, you can get a tremendous amount of extra dollars.

Like you could squeeze 20 or 30 years of retirement savings if you're behind,

especially,

you could squeeze that into like five or 10 years when you utilize a cash both

plan and you get a massive deduction for doing that.

Okay. Now a couple of other details because it has some elements of a defined

contribution plan. There are required annual employer contributions.

So what this means is that you want to make sure that if you're going to

implement a cash balance plan, that you intend to maintain the balance,

the cash balance plan for at least several years and that your business has

enough cashflow and it's profitable and successful enough. Um,

and it's not highly cyclical. By the way. I also want to mention with this,

you do not have to do the maximum that I outlined in the chart that I showed you

earlier.

You don't have to maximize the contribution every year then not that you can

contribute, can and and will vary. Okay.

The other thing that's really cool is that these plans are portable because if

you're the business owner and you retire,

you're not having to take like an annual income or a monthly income stream.

You're not stuck with that.

You can roll the money over into your IRA account and then you can do whatever

you want with it at that point. And then the last thing is,

is this is getting a little bit into the weeds here,

but I just wanted to mention that there are certain requirements for how these

accounts are invested. So they tend to be more conservative and you know,

an ideal target rate of return is somewhere in like the three to 6% range.

And so it's just a way it's,

it also allows us diversification because you might have these other investments

over here where they're invested in the stock market and you're trying to

maximize the growth on that,

but the goal with the a cash balance plan is to hit a targeted targeted rate of

return every year, which is in the mid single digits.

Questions? Do you have questions like cash balance plan and you're like,

this is a brand new thing. I've never heard of that before.

I don't know if it's right for me.

There's actually five questions that you would need to answer in the affirmative

like, yes, this is, this is my situation. Yes, that applies to me. Yes, yes,

yes. In order to decide if the cash balance plan makes sense for you.

Now and one of these later videos in this series,

I'm going to outline what those five questions are,

but for now if you have questions,

do you want to know what the cash balance plan is right for you in about 15

minutes on the phone and I can ask you several questions and we can have a

conversation and see if a cash block plan makes sense for you.

If you should move forward with the idea and explore it further or if you should

say, you know what, this isn't right for me.

So Click on the link below this video to schedule a free 15 minute call with me

with me, not a robot.

It's with me to see if the cash call the plan is right for you.

Thank you so much for watching.

My Name's Ashley Micciche please like comment and subscribe to this channel.

We put out new videos every single week geared towards small business owners who

are planning for their exit and planning for their retirement from their

business. Thank you again so much for watching and I will see you next week.