Given the recent market volatility, many business owners, executive and professionals are looking for ways to build up their depleted retirement plan accounts. The cash balance plan could provide this boost. This depends on many factors, including income levels and stability.
Eighty-two percent of cash balance plans are in place at firms with fewer than 100 employees, the survey found. Many Baby Boomers who own small businesses have assets tied up in the business; now that they are looking toward retirement, their advisers are recommending asset protection and a qualified plan with the highest possible contribution levels, the report states. “Small businesses are adopting these plans because they provide nice benefits for the employees at the same time create larger tax savings and retirement savings for the business owner,” Kravitz notes. According to the Profit Sharing Council of America, the average employee gets 2.9% of pay when their employer sponsors a 401(k) profit sharing plan, “but when a small business or employer sponsors a cash balance plan the average contribution is 6% of pay, so these plans provide a much richer benefit for the employees while at the same time creates larger contributions and tax deferred savings for the owners,” Kravitz says.
There is an attractive alternative for employers to attract and retain top talent. Many studies suggest that employees are looking for a pension plan when seeking new employment. The cash balance plan will be a win win for both the employee and the employer.
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