Cash Balance Plans: Supercharging Retirement Savings for High-Income Earners

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Doug Malachowski

Doug enjoys finding solutions for new business owners needing to make or save more money. He quickly uncovers a customer challenges to identify strategic solutions. His career has allowed him to form relationships with creative, inspiring, determined entrepreneurs over the years and loves helping solve their financial challenges.
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Cash Balance Plans: Supercharging Retirement Savings for High-Income Earners

Contributor, Doug Malachowski on September 23, 2025
2 min read

Most people are familiar with 401(k)s and IRAs. They know the annual contribution limits and the basic tax benefits. But what if you’re a high-income earner who wants to put away far more than the standard limits allow? That’s where a Cash Balance Plan comes in.

Often called a “hybrid retirement plan,” a cash balance plan combines the best features of a pension with the flexibility of a 401(k). For business owners and high earners, it can be one of the most effective ways to slash taxable income and build retirement wealth quickly.

What Is a Cash Balance Plan?

A cash balance plan is a type of defined benefit plan. Unlike a 401(k), where your retirement savings depend on contributions and investment performance, a cash balance plan promises you a specific retirement benefit based on a formula.

Here’s how it works:

  • Each year, the employer contributes to your account using a formula (such as a percentage of salary plus interest credits).
  • Each year, the employer contributes to your account using a formula (such as a percentage of salary plus interest credits).
  • At retirement, you can take the money as a lump sum or an annuity.

Why This Strategy Matters Now

For high-income earners, the contribution limits of traditional retirement plans often aren’t enough. A 401(k) maxes out at around $69,000 (with catch-up contributions) in 2025. By contrast, a cash balance plan can allow annual contributions well into the six figures—sometimes $200,000 or more, depending on your age and income.

That means:

  • Huge tax deductions today.
  • Massive retirement savings tomorrow.
  • A way to smooth out taxable income in high-earning years.

Who Can Benefit From a Cash Balance Plan?

This strategy is best suited for:

  • Business owners with consistent profits.
  • High-income professionals (doctors, lawyers, consultants) who want to accelerate retirement savings.
  • Entrepreneurs looking to reduce personal tax liability while reinvesting in retirement.

If your income is unpredictable, this may not be the best option—but for those with steady earnings, it can be a game changer.

How It Works in Practice

  1. Determine contributions based on your income and retirement goals.
  2. Take the deduction—employer contributions are tax-deductible.
  3. Grow wealth tax-deferred, then take lump sum or annuity distributions at retirement.

The key is compliance—these plans must meet IRS rules and include annual funding requirements.

Pros and Cons of Cash Balance Plans

Pros

  • Contributions can be several hundred thousand dollars annually.
  • Immediate, large tax deductions.
  • Provides predictable retirement income.

Cons

  • More complex than a 401(k).
  • Requires ongoing administration and actuarial calculations.
  • Less flexible if business profits fluctuate.

Deadlines to Keep in Mind

  • Deadlines to Keep in Mind
  • Contributions can be made up until your tax filing deadline (including extensions).

Final Thoughts

If you’ve outgrown traditional retirement accounts, a cash balance plan could be the answer. By allowing six-figure contributions and offering significant tax deductions, it’s one of the most powerful tools for high-income earners looking to build wealth and cut taxes.

Work with your CPA and a qualified retirement plan administrator to see if this strategy fits your business and financial goals.

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