Friends,
Over the next few weeks, we will highlight different retirement plans and the possible benefits to you and your business. We realize that maximum efficiency and tax savings are important to all business owners. The supplemental options to a 401(k) plan, mentioned in the linked articles below, give owners additional ways to increase contributions and tax savings.
Profit-Sharing Plan
- Typically used in conjunction with a 401(k) plan
- Allows employers to make contributions based on the profitability of the company
- Discretionary match – isn’t required every year
- Contributions are deductible to the employer
- Allows owner to save up to $70,000/year (or $77,500 with the catch-up contribution of $7,500) in 2025
- Participants aged 60-63 can save up to $81,250 a year with the higher catch-up contribution in 2025
Cash Balance Plan
- Defined benefit plan allowing additional tax-deferred savings
- Max deferral can reach over $400K for those in their 60s
- Required contribution for owner and employees
- Larger tax-deductible contributions
- Maximum lifetime funding limit of $3.5 million
- Changes in the actual value of the plan's investments are the responsibility of the employer and do not directly impact the amounts participants receive
Let us know if you would like to discuss retirement plan options for you or your business.
Andrew
https://www.milliman.com/en/insight/market-based-cash-balance-mbcbp-frequently-asked-questions