Cash Balance Plan Helps Dentist Catch Up On Retirement Savings Fast
- By Oaktree Advisors
Dr. Ken Peters, a 55 year old dentist with a staff of three, needed to accelerate his retirement savings to overdrive after putting his three children through college. Paying for private school had taken its toll on his ability to save for retirement. He was worried that he would not be able to retire by age 65 despite years of earning a substantial income.
Dr. Peters needed to condense 30 years of savings into 10, putting him in a position to comfortably retire as planned. He already had a 401(k) profit sharing plan but the current defined contribution limits of $54,000 were not going to be enough for him to meet his objectives.
What We Did
Our recommendation: Adding a cash balance plan to his 401(k) profit sharing plan that let him make the largest allowable contribution under IRS guidelines. Sole practitioners over age 50 with a small, younger staff are in a unique position: They can benefit from this combination plan where the retirement plan is structured so they receive up to 90% of the benefit.
By making an additional 2.5% contribution for each employee, Dr. Peters was able to make an annual contribution of $196,000 and turn his retirement goals into reality.