Cash Balance Plans for Physicians: Bigger Tax-Deferred Savings Than a 401(k)
If you're a high-earning physician maxing out your 401(k) and still writing a large check to the IRS every year, a cash balance plan may be the most powerful tool you're not using. It can allow tax-deductible contributions well beyond what a 401(k) alone permits.
What a Cash Balance Plan Is
A cash balance plan is a type of defined-benefit (pension-style) plan, but with an individual account balance that's easy to understand. Contribution limits are based on your age and income, and for physicians in their peak earning years they can be substantial — often far larger than 401(k) limits — because the plan is designed to fund a target retirement benefit over a shorter horizon.
Who It Fits
Cash balance plans work best for physicians and practice owners with strong, stable income who want to save aggressively and reduce current-year taxes — typically those already maxing other retirement accounts. They're frequently "stacked" on top of a 401(k)/profit-sharing plan for maximum effect. Because they involve actuarial calculations and a multi-year funding commitment, they need to be set up and maintained properly.
For the right physician, few strategies move as much money out of this year's taxable income and into long-term, tax-advantaged savings. Tax Planning for Physicians
General educational information, not tax advice. Contribution limits and suitability depend on your age, income, and practice structure — consult a qualified advisor.
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