Unlock the Potential of Cash Balance Plans to Maximize Retirement Savings and Minimize Taxes
As a busy physician, your primary focus is on delivering excellent patient outcomes. But what about your financial outcomes? Many medical professionals in private practice have implemented a 401(k) plan to reap the dual benefits of retirement savings and tax deductions. Yet, much like a complex patient case, your financial strategy may have untapped potential for optimization.
The Limits of a 401(k) Plan
A 401(k) plan is a fantastic starting point, but it comes with contribution limits. In 2025, the maximum annual contribution is $70,000 ($77,500 if you are age 50 or older, and $81,250 if you are between age 60-63). While this provides a solid foundation, there’s a way to scale your retirement savings significantly beyond these thresholds.
The Solution: Cash Balance Plans
Adding a cash balance plan to your financial strategy can elevate your retirement and tax planning. Fully qualified by the IRS, a cash balance plan allows high-earning business owners—those making more than $350,000 annually—to accumulate over $3 million within a decade. With a cash balance plan, your total tax-deductible contributions could increase from $70,000 to as much as $452,500 annually.

How Cash Balance Plans Work
A cash balance plan functions similarly to your 401(k):
Account Balance Growth:Â Each year, the plan grows through employer contributions and interest credits.
Tax Advantages:Â Contributions are tax-deductible, and growth is tax-deferred.
Portability: Upon distribution, you can roll over funds into an IRA to maintain tax-deferred growth.
These features mirror the appeal of your 401(k) but offer a much larger scale for wealth accumulation and tax efficiency.
Why Physicians Are Adopting Cash Balance Plans
Cash balance plans are gaining popularity among physician groups, from private practices to large multi-specialty clinics. Their advantages include:
Tax Savings:Â Substantial deductions for high-income earners.
Talent Retention:Â A competitive edge in attracting and retaining top-tier talent.
Scalability: Designed to deliver favorable outcomes for multiple owners and larger staff sizes.
Groups with 10 or more physicians often achieve significant tax savings and retirement benefits, making this a compelling option for high-earning practices.
Proactive Strategies for Financial Wellness
Just as you advise patients on proactive health strategies, we encourage proactive financial strategies. The cash balance plan is not a cure-all, but for high-earning physicians seeking tax-efficient retirement solutions, it could be just the right prescription.
Take Action: Ready to explore how a cash balance plan could fit into your practice’s financial strategy? Let’s discuss how to optimize your financial outcomes and build a healthier retirement plan.
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