If you're self-employed and writing large checks to the IRS every year, you've probably wondered whether there's something beyond a Solo 401(k) that can actually move the needle. There is. It's called a cash balance plan, and yes, you can set one up - even if you're a sole proprietor working out of a home office with zero employees.
Key Takeaways
- 01Yes, self-employed individuals can establish a cash balance plan. Sole proprietors, single-member LLCs, S-corp owner-employees, and partners can all sponsor one - as long as they have earned income and can commit to consistent annual contributions.
- 02Cash balance plans allow contributions over $100,000 annually - often $200,000 to $300,000+ per year - far exceeding what a Solo 401 k, SEP, or other defined contribution plans permit. The exact amount depends on your age, income, and actuarial assumptions.
- 03These plans work best for high income business owners with stable profits of roughly $250,000–$500,000+ who want to reduce current taxes and rapidly build retirement savings in a compressed time frame.
- 04The tradeoffs are real: powerful tax savings and high contribution limits come with stricter funding rules, actuarial calculations, and ongoing plan administration requirements that don't exist with simpler retirement plans.
- 05Revolutionary Wealth designs and coordinates customized cash balance and 401(k) strategies for business owners earning $500,000+ who want integrated retirement and tax planning - not just a brochure and a handshake.
What Is a Cash Balance Plan (and How Do Cash Balance Plans Work)?
A cash balance plan is a modernized pension. It's legally a defined benefit plan, but instead of promising a monthly check for life like your grandfather's pension, it looks and feels like an account with a growing balance.
Here's how cash balance plans work in practice:
Each year, the plan credits your hypothetical account with a pay credit - either a fixed dollar amount or a percentage of compensation.
On top of that, you receive an interest credit, typically at a fixed rate. Interest credits in cash balance plans typically range from 4% to 5%, though some plans use a variable rate tied to an index.
The plan typically credits contributions with both pay credits and interest credits, which together grow your account balance over time.
The critical difference from a 401 k or other defined contribution plans: the business bears all investment risk. If the market tanks, that's the employer's problem, not the participant's. Cash balance plans are defined benefit plans with account balance features - a hybrid that gives you the upside of pension-style tax deductions with the readability of an account statement.
Because these are IRS-qualified pension plans, contributions are tax-deductible to the business and balances grow tax-deferred until distribution.
Can a Self-Employed Person Really Have a Cash Balance Plan?
Absolutely. Self-employed individuals - including a sole proprietor filing Schedule C, S-corp owner-employees paying themselves W-2 wages, and partners in professional firms - can sponsor a cash balance plan for themselves. The IRS doesn't have a special label for a "self-employed cash balance plan." It's the same type of defined benefit plan any employer would use, just designed for a very small or owner-only business.
The key requirement: you need earned income from the business. Passive investment income won't cut it. For a sole proprietorship, that means net earnings from self-employment. For an S-corp, it's your W-2 compensation.
Cash balance plans can only be funded if owners and employees are eligible based on the plan's terms. For owner only businesses with no common-law employees, the design is simpler - you often avoid the nondiscrimination and compliance testing headaches that come with staff. Typical eligible profiles include:
Solo attorneys and law firm partners
Consulting firm owners and 1099 contractors structured as S-corps
Physicians in private practice
Engineers, CPAs, and other high-income specialists
The entity structure matters for how compensation is calculated, but the door is open regardless of business type.
Who Is a Good Candidate for a Self-Employed Cash Balance Plan?
Not every self-employed person should rush into this. Cash balance plans are particularly powerful for older high-income business owners - but "powerful" and "right for you" aren't always the same thing.
The ideal candidate looks like this:
Annual income: Consistently $250,000–$500,000+ in earned income, with enough cash flow to fund significant retirement contributions every year.
Age: Mid-40s to mid-60s. Owners in this range who feel behind on retirement savings or want to compress 20 years of saving into 10–15 years get the most leverage.
Stability: Reasonably predictable profits matter. Defined benefit plans have minimum funding requirements each year, so feast-or-famine income creates risk.
Already maxed out: Business owners who've already hit the ceiling on a Solo 401 k or other defined contribution plans and are still staring at a large tax bill.
At Revolutionary Wealth, we typically recommend a cash balance plan when an owner wants to contribute at least $100,000 per year and the tax bracket and surplus cash flow justify the added complexity. If you're clearing $150,000 and feeling stretched, this probably isn't the move - yet.
Cash Balance Plan vs. Solo 401(k) and Other Defined Contribution Plans
Here's the simplest way to think about it: a Solo 401 k is a defined contribution plan with fixed annual limits. A cash balance plan is a defined benefit plan with actuarially determined limits that are often dramatically higher.
In 2026, the total annual contribution to a Solo 401 k (employee deferral plus employer profit sharing contributions) usually caps in the mid-$60,000s range for most high earners. A cash balance plan? Cash balance plans can provide five times higher contributions than 401(k)s - well over $100,000 to $300,000+ per year depending on age and compensation.
Other key differences:
Risk: In defined contribution plans (401 k, SEP, profit sharing plan), you bear investment risk. In a cash balance plan, the business promises a specific benefit and shoulders the market risk.
Flexibility: A Solo 401 k lets you decide how much to put in each year, within limits. A balance plan involves a long-term funding commitment - the plan actuary calculates what's required, and you pay it.
Combination power: Cash balance plans are defined benefit plans, unlike 401(k)s, but they work beautifully together. Combining a cash balance plan with a Solo 401(k) maximizes contributions. Many high-earning self-employed professionals use the 401 k for elective deferrals and Roth options, then layer the cash balance plan for scale.
How Much Could a Self-Employed Owner Contribute? (Age-Based Potential)
This is where it gets interesting - and where age actually works in your favor for once.
Cash balance contributions are back-solved from a target retirement benefit. The plan actuary uses actuarial assumptions - your age, income, years to retirement age, interest rate, mortality tables - to determine how much you need to contribute each year to reach the promised benefit. Cash balance contribution limits scale with age and income, and contribution limits for cash balance plans are age-dependent.
Cash balance plans allow for age-weighted contribution limits, which means older participants can contribute significantly more to cash balance plans than younger ones:
Age 35, compensation ~$360,000: annual contribution potential around $90,000–$100,000
Age 50, compensation ~$360,000: cash balance contribution approximately $197,000
Age 60, compensation ~$360,000: cash balance contribution roughly $325,000, and when combined with a defined contribution plan, total retirement contributions can push toward $400,000+
Contributions can range from $100,000 to over $300,000 annually depending on age. Cash balance plans can allow contributions up to $300,000 or more annually for those closer to retirement. In 2026, the maximum cash balance plan limit is $3.7 million as a lump-sum benefit.
Example: A 52-year-old consultant earning $400,000 could combine a Solo 401 k with a cash balance plan to potentially shelter well over $200,000 in a single year - all tax-deductible.
At Revolutionary Wealth, we use custom actuarial illustrations to show self-employed clients specific ranges of deductible contributions under different retirement age and benefit assumptions. No guesswork.
Tax Benefits of a Cash Balance Plan for Self-Employed Business Owners
Cash balance plan contributions are fully tax-deductible. Employer contributions to the plan are deductible business expenses, reducing taxable income at both federal and state levels. For self-employed individuals in a combined 40–45% marginal tax bracket, the math is straightforward:
Contribute $200,000 → save roughly $80,000–$90,000 in current taxes
Contribute $300,000 → save approximately $120,000–$135,000
Tax-deductible contributions reduce adjusted gross income (AGI), which triggers secondary benefits: lower exposure to the 3.8% Net Investment Income Tax, better positioning for certain deductions and credits, and potentially reduced taxation of Social Security in future years.
Inside the plan, investment growth compounds tax-deferred. No annual capital gains taxes, no dividend drag. At retirement, the account can be rolled to a traditional IRA, where distributions are taxed as ordinary income over time - ideally when you're in a lower tax bracket.
The real leverage comes from combining a cash balance plan with defined contribution plans. Coordinated contributions can move a significant share of annual income from current taxation into long-term savings vehicles. Tax deferral at this scale isn't a nice-to-have. It's the difference between building wealth and subsidizing someone else's.
Tax benefits can significantly enhance a business's bottom line - especially when contributions can exceed $100,000 annually for high earners and the tax deduction lands in your highest bracket. A dollar saved in taxes isn't just a dollar kept. It's a dollar compounding in your plan for the foreseeable future.
Key Requirements and Obligations Before You Set One Up
Cash balance plans aren't set-it-and-forget-it. Here's what you're signing up for:
Minimum funding is mandatory. Unlike purely discretionary defined contribution plans, minimum contributions must be made each year to avoid penalties - including a potential 10% excise tax on unpaid amounts. Cash balance plans require ongoing annual contributions based on actuarial calculations.
A cash balance plan must have a written plan document. Plans require formal documentation and annual Form 5500 filing. Plans must comply with IRS and Department of Labor regulations, and the legal requirements are real.
An enrolled actuary is generally essential for a cash balance plan. You'll need actuarial certification annually to calculate required contributions, and a third party administrator to handle plan administration, recordkeeping, and compliance testing.
Costs are real but deductible. Setup runs roughly $1,500–$3,000 for small business plans; ongoing administrative costs (actuary, TPA, PBGC premiums of $111 per plan participant in 2026, investment fees) run $2,000–$5,000+ annually for owner-only plans. These are also deductible business expenses.
Cash balance plans require ongoing compliance and administration. If your business has an eligible employee beyond you and your spouse, the plan must generally include them under nondiscrimination rules - increasing total required contributions.
One important nuance: while not as flexible as a Solo 401 k, there is often a range between minimum and maximum contributions the actuary can work with each year, especially after a few years of funding. You're not locked into one exact number forever.
How to Set Up a Cash Balance Plan If You're Self-Employed
Here's the step-by-step. It's more manageable than it sounds.
Step 1: Confirm suitability. Coordinate with your financial advisor, CPA, and a pension actuary. Analyze income stability, tax bracket, cash flow, and retirement goals. This is where Revolutionary Wealth starts - with numbers, not assumptions.
Step 2: Design the plan. Select your target retirement age, benefit formula (pay credit structure and interest crediting rate), desired annual contribution range, and whether to pair the cash balance plan with a Solo 401 k or profit sharing plan.
Step 3: Get your compensation and entity structure right. S-corp owners use W-2 wages as compensation. A sole proprietor uses net earnings from self-employment. The entity structure determines how plan compensation is calculated under IRC rules.
Step 4: Execute plan documents and open accounts. The TPA prepares the plan document, adoption agreement, and trust documents. You open the investment account that will hold plan assets. Everything must be in writing - no shortcuts.
Step 5: Fund and monitor annually. Make contributions by the tax filing deadline (including extensions - thanks to the SECURE Act, you can adopt a plan as late as the filing deadline for the year you want it to apply). Review annual actuarial reports. Adjust as needed in future years.
Investing Inside a Self-Employed Cash Balance Plan
Because the employer (you) bears investment risk, the investment strategy inside most cash balance plans is more conservative than a typical 401 k. The goal is to roughly match the plan's interest crediting rate - not to swing for the fences.
Common allocations include high-quality bonds, stable value funds, and a modest equity sleeve to provide some real return over inflation. Cash balance plans offer predictable interest credits of 4% to 5%, and the investment portfolio should be designed to deliver something in that range consistently.
Plan participants don't have individual investment direction here. The plan is trustee-directed with a single pooled investment account. If actual returns significantly underperform the interest credit, required contributions in future years increase. If returns outperform, the actuary may allow lower contributions later - a welcome cushion.
Revolutionary Wealth coordinates investment management with actuarial assumptions so the portfolio and funding strategy stay aligned. That's not a nice extra. It's how you avoid surprises.
When a Cash Balance Plan May Not Be the Right Fit
Not everyone should do this. Here's when to pause:
Volatile or unpredictable income. If your business swings between $500,000 and $100,000 year to year, the mandatory funding commitment can create serious cash flow strain.
Early-stage business. If you're still ramping up and every dollar of profit needs to go back into growth, locking into a defined benefit pension plan is premature.
Modest contribution goals. For desired contributions under roughly $50,000–$75,000 per year, the added administrative costs and complexity usually aren't justified. A Solo 401 k or SEP handles that range just fine.
Rapid hiring plans. If you expect to add many employees soon, wait and design a combined plan that accounts for the coming staff structure - otherwise you'll be redesigning (and paying for it) within a year or two.
Behavioral fit. If you value maximum year-to-year flexibility and minimal paperwork, traditional defined benefit plans may feel like a straitjacket. There's no lost time in waiting until you're genuinely ready.
There's no one-size-fits-all answer. Model multiple scenarios before committing.
How Revolutionary Wealth Helps Self-Employed Owners Use Cash Balance Plans
Revolutionary Wealth is an independent wealth management and financial planning firm specializing in integrated tax, retirement, and business planning for high-income business owners. We manage over $100 million directly and advise on over $500 million annually.
We typically work with self-employed clients in their late 50s and early 60s, and business owners earning $500,000+ who want to aggressively fund retirement while planning for an eventual business exit. Our process includes:
Detailed income and tax review
Coordination with your CPA and a plan actuary
Custom cash balance and defined contribution plan illustrations
Long-term retirement distribution planning, including RMDs, IRA rollovers, and Social Security coordination
Managing plan assets to align with actuarial assumptions and your broader estate planning goals
The question isn't whether you can set up a cash balance plan. It's whether you're leaving six figures of tax savings on the table every year by not doing it.
Schedule a consultation and we'll run your numbers - real numbers, not hypotheticals - so you can see exactly how much additional pre tax income you could shelter and how quickly you could build long term savings using a carefully structured cash balance plan.
FAQ
Can I set up a cash balance plan if I already have a Solo 401(k)?
Yes. Many self-employed owners pair a cash balance plan with a Solo 401 k or other qualified plans. When combined, employer contributions to the defined contribution side are typically limited to around 6% of compensation, but the cash balance plan handles the heavy lifting with much larger deductible amounts. Total contributions across both retirement plans must comply with IRS combined limits, requiring coordinated design by an actuary and plan administrator. This combination is often the most powerful way for high earners to maximize tax-deferred retirement savings.
How long do I need to keep a cash balance plan open?
The IRS expects cash balance plans to be long-term retirement vehicles, not one-year tax shelters. Most advisors suggest planning for at least 3–5 years, and often 7–10 years or more to fully realize the benefits and justify setup costs. Plans can be frozen or terminated if business conditions change, but frequent short-lived plans can attract scrutiny and may limit the strategy's value. Think multi-year commitment before you sign the plan document.
What happens to my cash balance plan if my income drops or my business slows down?
If profits fall, the actuary can sometimes adjust future contributions within a permissible range, but there are still minimum funding rules. In a more severe or prolonged downturn, the plan can potentially be frozen - stopping new benefit accruals - or terminated, with plan assets typically rolled to an IRA or other qualified plan. This is why conservative initial design matters: build in a buffer so the plan remains viable through a few lean years without creating a tax liability or penalty problem.
Can I include my spouse or future employees in my self-employed cash balance plan?
If your spouse is a bona fide employee or co-owner with earned income from the business, they can be included as a plan participant, often with age-based contributions tailored to your household goals. When you hire non-owner employees who meet the plan's eligibility rules (for example, an eligible employee who meets age and service requirements), defined benefit plan rules generally require covering them in a nondiscriminatory way. This increases total required contributions. If you anticipate rapid staff growth, coordinate plan design early.
How are distributions from a cash balance plan taxed when I retire?
At retirement or plan termination, most self-employed owners roll their cash balance plan benefit to a traditional IRA or another qualified plan to maintain tax deferral. Distributions from the IRA are taxed as ordinary income when withdrawn and are subject to required minimum distributions under current IRS rules. With proper planning, distributions can be coordinated with Social Security, other retirement plans, and taxable investments to manage lifetime taxes - turning a large pre tax accumulation into a carefully paced income stream.
Disclosures
This blog contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this blog will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Revolutionary Wealth LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.
Mutual Funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing in Mutual Funds. The prospectus, which contains this and other information about the investment company, can be obtained directly from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. An investment in the Fund involves risk, including possible loss of principal.
Rebalancing/Reallocating can entail transaction costs and tax consequences that should be considered when determining a rebalancing/reallocation strategy.
A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment. Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus.
Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.
Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and, if taken prior to 59 ½, a 10% federal tax penalty. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated.
Not associated with or endorsed by the Social Security Administration, Medicare or any other government agency. Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits.
Please consider the investment objectives, risks, charges, and expenses carefully before investing in Variable Annuities. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from the insurance company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity sub-accounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.
QLACs cannot be purchased with Roth or Inherited IRA dollars; value of such IRAs cannot be included in determining 25% premium limit. If Funding Source is Traditional IRA, 25% limit is calculated by combining the total value of all Traditional IRAs as of December 31st of the previous year. If Funding source is Employer sponsored qualified plan (401k, 403b and governmental 457b), 25% limit is calculated on an individual plan basis based on the plan's account value on the previous day's market close. If you previously purchased a QLAC, the calculation of your 25% limit is more complicated. Please contact an attorney or tax professional for additional details. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.
The projections or other information generated by Monte Carlo analysis tools regarding the likelihood of various investment outcomes are hypothetical in nature, are based on assumptions that you provide which could prove to be inaccurate over time, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.
Disclosures
Securities and investment advisory services offered through Integrity Alliance, LLC, Member SIPC www.sipc.org (opens in a new window). Integrity Wealth is a marketing name for Integrity Alliance, LLC. Revolutionary Wealth LLC is not affiliated with Integrity Wealth. This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all services referenced on this site are available in every state and through every advisor listed. Tax and legal services are not offered through Integrity Wealth.
Full disclosures
Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.
Active portfolio management, including market timing, can subject longer term investors to potentially higher fees and can have a negative effect on the long-term performance due to the transaction costs of the short-term trading. In addition, there may be potential tax consequences from these strategies. Active portfolio management and market timing may be unsuitable for some investors depending on their specific investment objectives and financial position. Active portfolio management does not guarantee a profit or protect against a loss in a declining market.
Rebalancing/Reallocating can entail transaction costs and tax consequences that should be considered when determining a rebalancing/reallocation strategy.
Tax-loss harvesting is a strategy of selling securities at a loss to offset a capital gains tax liability. It is typically used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains, though it is also used for long-term capital gains.
Not associated with or endorsed by the Social Security Administration, Medicare or any other government agency. Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits.
Any references to protection or steady and reliable income streams refer only to fixed insurance products. References to protection can also refer to estate planning. They do not refer, in any way, to securities or investment advisory products.
Fixed Annuities are long term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Withdrawals prior to age 59 1/2 may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.
Mutual Funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing in Mutual Funds. The prospectus, which contains this and other information about the investment company, can be obtained directly from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. An investment in the Fund involves risk, including possible loss of principal.
A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment. Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus.
Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and, if taken prior to 59 1/2, a 10% federal tax penalty. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated.
Please consider the investment objectives, risks, charges, and expenses carefully before investing in Variable Annuities. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from the insurance company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity sub-accounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.
QLACs cannot be purchased with Roth or Inherited IRA dollars; value of such IRAs cannot be included in determining 25% premium limit. If Funding Source is Traditional IRA, 25% limit is calculated by combining the total value of all Traditional IRAs as of December 31st of the previous year. If Funding source is Employer sponsored qualified plan (401k, 403b and governmental 457b), 25% limit is calculated on an individual plan basis based on the plan's account value on the previous day's market close. If you previously purchased a QLAC, the calculation of your 25% limit is more complicated. Please contact an attorney or tax professional for additional details. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.
The projections or other information generated by Monte Carlo analysis tools regarding the likelihood of various investment outcomes are hypothetical in nature, are based on assumptions that you provide which could prove to be inaccurate over time, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.
This material is for general informational purposes only and is not intended to provide specific investment, tax, or legal advice or recommendations for any individual. Consult with your own tax or legal professional regarding your specific situation before acting on any information presented here. The information has been developed from sources believed to be providing accurate information, but no representation is made as to its accuracy or completeness.
Cash balance and other qualified retirement plan strategies described here are general in nature; actual contribution limits, deductibility, and plan design depend on individual circumstances, plan documents, and applicable IRS rules, and should be reviewed with a qualified plan actuary or administrator.