Cash Balance Plans

[finalpsychyear]

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i did this for 4 years but in retrospect i dont think anyone should do it under 40. I was in my early to mid 30s and again we are talkign 4 years ago was contributing something like 70-80 plus the reduced amount in your 401k. so combined it was like 100-110k ish. It was stressful at times to have to come up with the 70k plus the 401k amounts but once you get into your mid 40-50s you can literally contribute 120-140+ just on the CBP portion so thats the age to do it imo. I had no house, rented a 1500 dollar place, single, 350 car lease payment during most of that time i had the plan open.

They let me invest in whatever i wanted bc i was a single solo prop so i just put it all in tesla then they tried to say thats probably not safe. I didnt listen got shares cheap and never sold. Decided to terminate and rolled over into my 401k.

Basically I was able to build up a 401k in 4 years which had the contributions that would have taken me 8-9 years if i was only doing the max solo 401k.

 

[aneftp]

i did this for 4 years but in retrospect i dont think anyone should do it under 40. I was in my early to mid 30s and again we are talkign 4 years ago was contributing something like 70-80 plus the reduced amount in your 401k. so combined it was like 100-110k ish. It was stressful at times to have to come up with the 70k plus the 401k amounts but once you get into your mid 40-50s you can literally contribute 120-140+ just on the CBP portion so thats the age to do it imo. I had no house, rented a 1500 dollar place, single, 350 car lease payment during most of that time i had the plan open.

They let me invest in whatever i wanted bc i was a single solo prop so i just put it all in tesla then they tried to say thats probably not safe. I didnt listen got shares cheap and never sold. Decided to terminate and rolled over into my 401k.

Basically I was able to build up a 401k in 4 years which had the contributions that would have taken me 8-9 years if i was only doing the max solo 401k.

Key word being “single” and living cheap

You also mentioned it was stressful at times

Imagine being married with 3 kids spending 75k post tax on private school for 3 kids under 15. With pending car insurance for the teens.

Life gets expensive quickly when you Have kids and even more stressful.

But congrats taking the risks on Tesla. My other cardiac anesthesia younger buddy friend got screw in a mednax deal gone in mid 2010s. Plus screwed in another you don’t make partnership in job he landed next.

He rolled 200k (401k?) into Tesla beginning of Jan 2020 being pissed at the world. Up to 2 million in one year. He’s probably at 4 million after this run up.

 

[finalpsychyear]

Key word being “single” and living cheap

You also mentioned it was stressful at times

Imagine being married with 3 kids spending 75k post tax on private school for 3 kids under 15. With pending car insurance for the teens.

Life gets expensive quickly when you Have kids and even more stressful.

But congrats taking the risks on Tesla. My other cardiac anesthesia younger buddy friend got screw in a mednax deal gone in mid 2010s. Plus screwed in another you don’t make partnership in job he landed next.

He rolled 200k (401k?) into Tesla beginning of Jan 2020 being pissed at the world. Up to 2 million in one year. He’s probably at 4 million after this run up.

They are ideally designed for late 40s and early 50s who are high earning docs and have gone through raising kids and maybe colleges, have a house and maybe more than halfway paid off with disposable 100k.

Then you can dump that 100-150k extra into the CBP. I dont know the math but i feel the 70k sep/401k, plus hsa, plus backdoor roth x 2 is plenty for those who started by late 30s or early 40s it adds up to almost 100k. CBP in retrospect is how it was said early i this thread to "catch up". You could go deep into the math that if you just paid the taxes on that 100k but threw it in the brokerage 10% s and p vs putting a larger amount growing at 3-4% which you have to pay income tax at distribution plus the starting/stopping/annual CBP fees vs the post tax money that you only pay capital gains and can pass on to future gen with step up in basis that you pay little to no fees dumping in an after tax brokerage.

 

[aneftp]

They are ideally designed for late 40s and early 50s who are high earning docs and have gone through raising kids and maybe colleges, have a house and maybe more than halfway paid off with disposable 100k.

Then you can dump that 100-150k extra into the CBP. I dont know the math but i feel the 70k sep/401k, plus hsa, plus backdoor roth x 2 is plenty for those who started by late 30s or early 40s it adds up to almost 100k. CBP in retrospect is how it was said early i this thread to "catch up". You could go deep into the math that if you just paid the taxes on that 100k but threw it in the brokerage 10% s and p vs putting a larger amount growing at 3-4% which you have to pay income tax at distribution plus the starting/stopping/annual CBP fees vs the post tax money that you only pay capital gains and can pass on to future gen with step up in basis that you pay little to no fees dumping in an after tax brokerage.

Yup. My older brother did this for years in his 40s and 50s but he had 3 kids to raise
Many docs (not all) but many docs don’t have kids till their mid 30s these days

True state academics isn’t bad for dumping 100-120k pretax (or Roth) plus also. Employer plus employee via 401/403b/457b

Your math is correct. Any investment in your (even 40k) 30s is better than trying to catchup in ur 50s at 150k a year pretax because investments double every 7 years

So someone putting 40k age 32k should have 80k age 39. And 160k age 46. That’s a massive head start than someone trying to start at age 46 putting 150k a year

 

[Arch Guillotti]

i did this for 4 years but in retrospect i dont think anyone should do it under 40. I was in my early to mid 30s and again we are talkign 4 years ago was contributing something like 70-80 plus the reduced amount in your 401k. so combined it was like 100-110k ish. It was stressful at times to have to come up with the 70k plus the 401k amounts but once you get into your mid 40-50s you can literally contribute 120-140+ just on the CBP portion so thats the age to do it imo. I had no house, rented a 1500 dollar place, single, 350 car lease payment during most of that time i had the plan open.

They let me invest in whatever i wanted bc i was a single solo prop so i just put it all in tesla then they tried to say thats probably not safe. I didnt listen got shares cheap and never sold. Decided to terminate and rolled over into my 401k.

Basically I was able to build up a 401k in 4 years which had the contributions that would have taken me 8-9 years if i was only doing the max solo 401k.

Why was the 401k reduced?

 

[finalpsychyear]

Why was the 401k reduced?

Something about ersa related stuff. Not sure u have to deal with that in bigger groups doing it. For me basically if the solo 401k was 60k employer and employee combined id only get like 35/37 tax deductible but u could post tax megabackdoor the difference.

Again with sep/401k being 70k alone now i think if u start early in ur career and u do hsa/roth CB may be not needed but if ur late and need a jumpstart in late 40/50s it may make sense. Some groups will terminate every 3 yrs so they can dump it in 401k and get s/p500 returns vs 3-4% and then restart the plans. Rinse and repeat.

 

[aneftp]

Something about ersa related stuff. Not sure u have to deal with that in bigger groups doing it. For me basically if the solo 401k was 60k employer and employee combined id only get like 35/37 tax deductible but u could post tax megabackdoor the difference.

Again with sep/401k being 70k alone now i think if u start early in ur career and u do hsa/roth CB may be not needed but if ur late and need a jumpstart in late 40/50s it may make sense. Some groups will terminate every 3 yrs so they can dump it in 401k and get s/p500 returns vs 3-4% and then restart the plans. Rinse and repeat.

It’s funny how people define mega backdoor Roth and I’m definitely showing my age on this. Because the original mega Roth conversion was part of the 2006 tax laws that allowed high income earners to covert non deductible IRAs plus all
Their pretax ira and they had 2 years to pay the tax conversions

Because Roth conversion had major income limits back than. You could only contribute to a non deductible IRA but not convert to Roth IRA if you made over 80k (single) or 140k (married) (circa 2007/2008 tax years)

These laws have changed so much over the years.

“A "mega backdoor" in the context of 2006 law typically refers to the "backdoor Roth IRA" provision created within the Tax Increase Prevention and Reconciliation Act (TIPRA) of 2006, which essentially allowed high-income earners to indirectly contribute to a Roth IRA by making after-tax contributions to a traditional IRA and then converting them to a Roth IRA, bypassing income limitations on direct Roth IRA contributions; this strategy is now often called a "mega backdoor Roth" due to the potential for significantly larger contributions”

 

[Arch Guillotti]

Something about ersa related stuff. Not sure u have to deal with that in bigger groups doing it. For me basically if the solo 401k was 60k employer and employee combined id only get like 35/37 tax deductible but u could post tax megabackdoor the difference.

Again with sep/401k being 70k alone now i think if u start early in ur career and u do hsa/roth CB may be not needed but if ur late and need a jumpstart in late 40/50s it may make sense. Some groups will terminate every 3 yrs so they can dump it in 401k and get s/p500 returns vs 3-4% and then restart the plans. Rinse and repeat.

Do you mean ERISA? Not sure how that would affect anything. The limits are set by the IRS.

3 years is very aggressive. More like 5-7 I think.

 

[ERRES2288]

i did this for 4 years but in retrospect i dont think anyone should do it under 40. I was in my early to mid 30s and again we are talkign 4 years ago was contributing something like 70-80 plus the reduced amount in your 401k. so combined it was like 100-110k ish. It was stressful at times to have to come up with the 70k plus the 401k amounts but once you get into your mid 40-50s you can literally contribute 120-140+ just on the CBP portion so thats the age to do it imo. I had no house, rented a 1500 dollar place, single, 350 car lease payment during most of that time i had the plan open.

They let me invest in whatever i wanted bc i was a single solo prop so i just put it all in tesla then they tried to say thats probably not safe. I didnt listen got shares cheap and never sold. Decided to terminate and rolled over into my 401k.

Basically I was able to build up a 401k in 4 years which had the contributions that would have taken me 8-9 years if i was only doing the max solo 401k.

Weren't you massively overfunded in your plan? Most plans credit rate 4-5% per year and so if you get this way overfunded for the pre determined benefit you pay tax on virtually all of the overfunded amount.