Logo

Log In Sign Up |  An official publication of: American College of Emergency Physicians
Navigation
  • Home
  • Multimedia
    • Podcasts
    • Videos
  • Clinical
    • Airway Managment
    • Case Reports
    • Critical Care
    • Guidelines
    • Imaging & Ultrasound
    • Pain & Palliative Care
    • Pediatrics
    • Resuscitation
    • Trauma & Injury
  • Resource Centers
    • mTBI Resource Center
  • Career
    • Practice Management
      • Benchmarking
      • Reimbursement & Coding
      • Care Team
      • Legal
      • Operations
      • Quality & Safety
    • Awards
    • Certification
    • Compensation
    • Early Career
    • Education
    • Leadership
    • Profiles
    • Retirement
    • Work-Life Balance
  • Columns
    • ACEP4U
    • Airway
    • Benchmarking
    • Brief19
    • By the Numbers
    • Coding Wizard
    • EM Cases
    • End of the Rainbow
    • Equity Equation
    • FACEPs in the Crowd
    • Forensic Facts
    • From the College
    • Images in EM
    • Kids Korner
    • Medicolegal Mind
    • Opinion
      • Break Room
      • New Spin
      • Pro-Con
    • Pearls From EM Literature
    • Policy Rx
    • Practice Changers
    • Problem Solvers
    • Residency Spotlight
    • Resident Voice
    • Skeptics’ Guide to Emergency Medicine
    • Sound Advice
    • Special OPs
    • Toxicology Q&A
    • WorldTravelERs
  • Resources
    • ACEP.org
    • ACEP Knowledge Quiz
    • Issue Archives
    • CME Now
    • Annual Scientific Assembly
      • ACEP14
      • ACEP15
      • ACEP16
      • ACEP17
      • ACEP18
      • ACEP19
    • Annals of Emergency Medicine
    • JACEP Open
    • Emergency Medicine Foundation
  • About
    • Our Mission
    • Medical Editor in Chief
    • Editorial Advisory Board
    • Awards
    • Authors
    • Article Submission
    • Contact Us
    • Advertise
    • Subscribe
    • Privacy Policy
    • Copyright Information

Cash Balance Plans Can Be an Extra Retirement Savings Account

By James M. Dahle, MD, FACEP | on May 14, 2015 | 3 Comments
End of the Rainbow
  • Tweet
  • Click to email a link to a friend (Opens in new window) Email
Print-Friendly Version

All contributions into the plan are pooled and invested together by the plan trustee. However, hypothetical individual accounts are tracked and credited with a certain amount of interest each year, depending on the performance of the underlying investments. If the investments perform well, that credited interest rate may be higher up to a certain point, such as 5–7 percent per year. If the investments perform very well, the additional earnings, above and beyond the 5–7 percent limit, are allocated to a surplus account where they can be used to make up for future shortfalls in investment performance or to reduce future required contributions. If the investments perform poorly, the owners of the company may be required to contribute additional money to the plan to make up the losses over a period of a few years. This aspect of defined contribution plans turns off many physicians (who are generally not only the participants in the plan but also the owners of the company). However, in reality, this mechanism is of significant benefit to the physician. Not only do you get to defer even more money into the plan, the make-up contributions are also deductible. You are essentially forced to buy low, boosting future market returns.

You Might Also Like
  • A Health Savings Account May Be Your Best Retirement Plan
  • How Independent Contractors Can Set Up Retirement Accounts
  • Behind in the Retirement Savings Game?
Explore This Issue
ACEP Now: Vol 34 – No 05 – May 2015

Many emergency physician partnerships have incorporated both a 401(k)/profit-sharing plan and a cash balance plan into their practices. Independent contractors without employees can also use this combination of accounts. An individual 401(k) is relatively easy to set up. A personal defined benefit plan is a little more complicated but still widely available from a number of firms at a fair cost. Because you are both the trustee and the participant, you will have even more control over your investments.

Contribution limits to these plans vary based on a number of actuarial factors, such as the age of the participants. The older the participants, and the fewer years they will be in the plan prior to retirement, the more that can be contributed. Typical maximum contributions for emergency physicians range from $10,000 to more than $100,000 per year, all in addition to your 401(k) and IRA contributions.

Cash balance plans are a type of defined benefit plan that resembles a defined contribution plan. Emergency physicians interested in boosting retirement savings and minimizing their annual tax bill should give strong consideration to adding a cash balance plan on top of their existing 401(k) plan. A cash balance plan is a great option for those who wish to save for retirement and are already maxing out their 401(k)s and backdoor Roth IRAs.

Pages: 1 2 3 | Single Page

Topics: Emergency PhysicianPersonal FinanceRetirement

Related

  • Emergency Physician Finances: Fix Common Planning Gaps

    May 9, 2025 - 0 Comment
  • What To Know If You’re a 1099 Independent Contractor

    August 13, 2024 - 2 Comments
  • Why Performance Chasing Is an Investing Error

    June 14, 2024 - 0 Comment

Current Issue

ACEP Now: July 2025

Download PDF

Read More

About the Author

James M. Dahle, MD, FACEP

James M. Dahle, MD, FACEP, is the author of The White Coat Investor: A Doctor’s Guide to Personal Finance and Investing and blogs at http://whitecoatinvestor.com. He is not a licensed financial adviser, accountant, or attorney and recommends you consult with your own advisers prior to acting on any information you read here.

View this author's posts »

3 Responses to “Cash Balance Plans Can Be an Extra Retirement Savings Account”

  1. July 22, 2015

    pete levasseur Reply

    I read your cash balance plans article. A note to be made is that if you have BOTH a 401k and a defined benefit plan, your 401k is limited to 18k-24k (age dependent)plus 6% of Schedule C income, NOT $35,000 as in a solo 401K.

  2. September 16, 2015

    DOI Reply

    WCI,

    Looking into setting up a cash balance plan (cbp) have few questions.

    1) Does your cbp provide a third party administrator (tpa)or do you have to get your own?

    2) What types of portfolios does your cbp offer?

    3) What do think is a fair cap on aum fees for these cbp?

    4) What is going market rate for a tpa?

    5) Do you have a list of cbp providers like was done in 401k comparison article?

    Thanks for the great previous articles, have changed my out look on retirement!

    • September 21, 2015

      James M. Dahle, MD, FACEP Reply

      1) Generally provided.
      2) Ours is a reasonable mix of mostly index mutual funds. I’ve seen portfolios anywhere from 52% to 72% stock (which I think is probably a little on the high side.)
      3) As low as possible. Mine charges 0.3-0.4%.
      4) Not sure.
      5) No. That might be worth a future post though.

Leave a Reply Cancel Reply

Your email address will not be published. Required fields are marked *


*
*

Wiley
  • Home
  • About Us
  • Contact Us
  • Privacy
  • Terms of Use
  • Advertise
  • Cookie Preferences
Copyright © 2025 by John Wiley & Sons, Inc. All rights reserved, including rights for text and data mining and training of artificial technologies or similar technologies. ISSN 2333-2603