6 second take: Need another way to save for retirement? Read up on what a cash balance plan is, how it works, and whether it’s the right tool for you.
America is obsessed with saving for retirement. You hear about it every day. Social Security will be kaput in the next few decades, and if you don’t save enough for old age, a daily diet of cat food, misery, or worse awaits. Thankfully, we have 401(k)s, 403(b)s, and pension plans to help us save. Cash balance plans (CBPs) are another leg of that retirement savings regimen.
They’re popular with small-business owners who are responsible for funding and running the plans for both themselves and their employees. What’s unique about CBPs is that they offer savers (namely procrastinators, older folks, and high earners) a quick and simple way to build a sizable nest egg while getting an income-tax reduction to boot.
Today, CBPs hold more than $1 trillion in …