Cash Balance Plan

[agammaglobulin]

To enroll, or not to enroll, that is the question.

I'm a member of a physician owned group that is considering starting a Cash Balance Plan. I am in my early 30s, starting a family, saving for a house in a HCOL area. I would ideally like to have the cash on hand as I plan to have a lot of expenses in the coming years, however, seeing the financial benefit of reducing taxable income by putting away large amounts of money pre-tax (about 50K at my age, more as you get older up to 150k/yr). My concerns is not having access to this and the opportunity cost as Cash Balance Plans typically are lower returns (4-5%) than a 401K or non-tax advantage account. Yes, I am already contributing the max amount to 401(k) and backdoor roth ira.

Thoughts/advice are much appreciated.

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[Raryn]

To enroll, or not to enroll, that is the question.

I'm a member of a physician owned group that is considering starting a Cash Balance Plan. I am in my early 30s, starting a family, saving for a house in a HCOL area. I would ideally like to have the cash on hand as I plan to have a lot of expenses in the coming years, however, seeing the financial benefit of reducing taxable income by putting away large amounts of money pre-tax (about 50K at my age, more as you get older up to 150k/yr). My concerns is not having access to this and the opportunity cost as Cash Balance Plans typically are lower returns (4-5%) than a 401K or non-tax advantage account. Yes, I am already contributing the max amount to 401(k) and backdoor roth ira.

Thoughts/advice are much appreciated.

There's also questions about what happens to the money if you leave the practice prior to retiring - as far as I know, some require the money be paid out immediately, as a lump sum, at your marginal tax rate that year. Others let you pro-rate it out over N years.

I don't know enough about cash balance plans to say what the odds are yours has some terms that you wouldn't like in that situation, but it's something I'd take a hard look at if there was any chance I wasn't staying at that practice until I was 60 years old.

 

[NITRAS]

If it were me, I'd rather have liquidity in either safe investment or pay my taxes and have an after tax fund in good long term investments.

 

[Hercules]

To enroll, or not to enroll, that is the question.

I'm a member of a physician owned group that is considering starting a Cash Balance Plan. I am in my early 30s, starting a family, saving for a house in a HCOL area. I would ideally like to have the cash on hand as I plan to have a lot of expenses in the coming years, however, seeing the financial benefit of reducing taxable income by putting away large amounts of money pre-tax (about 50K at my age, more as you get older up to 150k/yr). My concerns is not having access to this and the opportunity cost as Cash Balance Plans typically are lower returns (4-5%) than a 401K or non-tax advantage account. Yes, I am already contributing the max amount to 401(k) and backdoor roth ira.

Thoughts/advice are much appreciated.

My 8 doc EM small democratic group started a CBP earlier this year. We researched it for about a year, and I’d be happy to discuss. From my standpoint it’s a great deal. Instead of having the $55k pretax from just the 401k we now can put ~$100k pretax between the two. Out marginal tax rates were 40-45% so putting an extra $50k/year each saved us a considerable amount in taxes since almost half of those last $50k were going to taxes.


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