Save. Plan. Retire.

Cash Balance Retirement Plan Calculator

cash balance retirement plan calculator

As a small business owner, a cash balance retirement plan may help you save more than the standard 401(k). Since these types of defined benefit plans differ from traditional pension plans in their contribution limits and structuring, working with an advisor from Fisher can help determine whether this tax-advantaged strategy makes sense for your goals.

Cash balance pension plan calculators can provide insight into how the benefits you may receive at retirement could differ from traditional defined benefit plans. Cash balance plans have often been compared to 401(k)s as they offer similar investment management and the promise of defined benefit at retirement; however, their account balance instead provides monthly income streams.

Cash balance pension plans differ from traditional pension plans in that an employee can withdraw their account balance via lump sum withdrawal or annuity payout at retirement. When an employee retires, their vested balance may be transferred directly into an IRA account (provided their new employer accepts rollovers).

The Cash Balance Retirement Plan Calculator will consider both your current savings and any promised retirement benefit, as well as future rates of growth of both and any investments purchased for the plan by your employer. This differs significantly from traditional defined benefit pension plans which assume investments will produce equal returns each year.

Assume you’re in your mid-30s and currently contributing the maximum annual maximum contribution of $69,000 into a 401(k), plus $7,500 each to backdoor Roth accounts and backdoor Roth IRAs for both spouses. A cash balance plan may allow for even greater savings depending on actuarial assumptions made by your employer and plan design.

At the core, cash balance plans still provide significant tax advantages when compared with other forms of retirement savings, like 401(k). Furthermore, most employers must offer employees either an annuity payout at retirement or lump sum payments that can be converted to an IRA account.

Cash balance pension plans tend to be more costly to administer than other forms of defined contribution plans, like 401(k). This is likely due to their stricter actuarial process and employer responsibility for funding their portion of the plan.

Most people find the benefits of cash balance plans outweigh their associated costs, particularly those nearing retirement and concerned about having enough income in retirement. A cash balance pension plan provides them with a predictable, steady stream of income — exactly what they need! If you want to maximize your retirement savings, speak with your Fisher financial professional about utilizing a cash balance pension plan calculator.