Quote:
Originally Posted by TomAce
The lack of cash over cap makes the MBCBP at risk to IRS limit changes. Not to mention the 6.5% target rate is well below the market average of 10%. Delta’s eventual 18% DC with cash over cap with optional spillover into a MBCBP is a better retirement option.
I fail to see what is so great about our retirement to make all the concessions worthwhile.
https://www.emparion.com/cash-balanc...43.4%20million.
What is the IRS limit for a cash balance plan?
Cash balance plans are a type of defined benefit plan. But they have a few differences compared to a traditional defined benefit structure.
For a self-employed business owner who wants to contribute the maximum lifetime limit to a cash balance plan, the owner’s annual tax-deductible contributions to the plan will generally range from $100,000 to $300,000 annually (depending on income and the owner’s age). The annual contribution is generally not fixed and will go up or down depending on a variety of criteria.
The goal is to generate a certain benefit at retirement age. Essentially a cash balance plan is aiming for a retirement amount down the road.
This is in contrast to how a 401(k) works. A 401(k) plan establishes the maximum contribution
upfront. They both are retirement savings vehicles. They just go about it a little differently.
Once money is contributed to a 401(k) plan, the account balance could grow to millions of dollars or in theory it could go to zero! For plan compliance purposes, it doesn’t really matter.
Just give us a little information and we’ll get you a custom illustration in 24 hours.
FREE Illustration ❯A cash balance plan doesn’t really have an annual contribution limit like a 401(k). This is because it is trying to reach a specific amount upon retirement (typically at 62 years old).
The amount of money in the plan at retirement is dependent on certain things. But mostly it depends on your average compensation. Assuming maximum compensation, you can have about $3.4 million upon retirement. A nice chunk of money.
As an example, the maximum annual contribution for a 401(k) plan is $61,000 ($67,500 for age 50+) for 2023. However, the maximum cash balance plan contribution is as high as $420,000.