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The Benefits of A Cash Balance Plan For Sole Proprietors

Aug 2, 2023

By leveraging a cash balance plan, sole proprietors can accelerate their retirement savings and minimize annual tax liability for their businesses. This video tells the story of one business owner who took advantage of this new approach as she prepared for her own retirement.  


Wendy Frame:

Hello, I'm Wendy Frame, partner at EisnerAmper, and today I'm going to highlight how a cash balance plan helped accelerate retirement savings for one of our valued clients.

After several years of growing her consulting practice, this business owner started to think about getting prepared for her own retirement. At 50 years old, she found herself behind in her retirement savings. She'd recently finished paying college tuition for her son and was starting to make money in her company. The success of her business also brought a higher tax bill along with it. She reached out to our team for guidance and to understand her options. We carefully evaluated this business owner's situation and recommended adding a cash balance plan to her existing 401k profit sharing plan. We explained that cash balance plans allow employers to deduct significantly higher contributions than they can with a 401k profit sharing plan alone.

As a sole proprietor, this business owner had no other employees so she had the flexibility in deciding how much she wanted to make in annual contributions. With this new approach, we helped her accelerate her retirement savings and minimize her annual tax liability for her growing business. I'm happy to report that after eight years of participation in the two plans, she now has $2 million set aside for retirement. In 2022, her total deductible contributions were $360,000, which saved her about $150,000 in taxes for the year.

Working with our team helped this business owner create a new and effective retirement strategy that made the most sense for her as an individual and also for her budding business. A cash balance plan can be a great solution for many clients, whether they're corporations, sole proprietorships, or partnerships. If you're interested in learning more about cash balance plans or other ways we can support you and your business, check out our website at Thank you.

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Wendy Frame

Wendy Frame is a Partner with decades of experience in retirement plan consulting.

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