Cash Balance Plan Tax Savings 2027 Calculator
Estimate the 2027 Cash Balance Plan contribution and tax savings for self-employed high earners stacking on top of a 401(k).
What Is a Cash Balance Plan?
A Cash Balance Plan is a HYBRID retirement plan — legally a defined benefit plan but described in account-style terms ('your balance grew by X% interest credit this year'). It allows MUCH higher contributions than a Solo 401(k) for ages 45+ while feeling like a 401(k) from the participant's view. Combined with a Solo 401(k), self-employed professionals can shelter $200K-$400K/year of pre-tax income. Source: IRC §401(a)(35), §415. Last updated: May 2026.
Age-Weighted Contribution Mechanics
Each year you receive a 'pay credit' (typically 5-25% of compensation) plus an 'interest credit' (typically 4-5% guaranteed). The IRS allows contributions sized to fund a target lump sum at age 62 — about $3.0M (2027 estimate). Older participants need higher pay credits because they have fewer years to accumulate. A 55-year-old at $400K income can contribute $150K-$200K to CB; a 60-year-old can hit $250K-$300K.
Stacking with Solo 401(k)
The combined 401(k) + CB structure is the gold standard for self-employed high-income earners. The Solo 401(k) provides employee deferral ($24,500) + small employer contribution (often 6%); the Cash Balance provides the big age-weighted contribution. For a 55-year-old at $400K, total shelter often exceeds $250K — saving $100K+ in federal + state tax annually.
Costs and Considerations
Annual fees: $3,000-$8,000 (actuary + administration). Form 5500 required. Generally must commit to 5+ years. Solo plans only — adding employees triggers participation requirements and PBGC premiums. The math: $200K contribution at 42% combined = $84,000/year tax savings; over 10 years that's $840K vs $30-80K in admin costs. ROI is enormous.
Frequently Asked Questions
What's the 2027 Cash Balance Plan target lump sum?
Approximately $3.0M (2027 projected, based on IRS \u00a7415(b) annual benefit limit of $290,000 actuarially converted). This is the maximum account balance at retirement age 62. Your contribution today is sized to accumulate to this target with assumed 5% interest credit growth.
How much can a 55-year-old self-employed earner contribute to a CB plan?
Typically $150,000-$200,000/year at $300K-$400K SE income. Combined with a Solo 401(k) on top ($32,000 employee deferral + small employer match), total annual shelter often reaches $250K-$280K. A 60-year-old can hit $300K-$350K combined.
Can I have a Cash Balance Plan and Solo 401(k) at the same time?
Yes \u2014 this is the standard 'stacked' structure for self-employed high earners. The CB plan handles the age-weighted big contributions; the Solo 401(k) adds the employee deferral. Both contributions are fully deductible on Schedule 1, line 16.
What if I have part-time employees?
Adding non-spouse employees triggers nondiscrimination testing \u2014 you must provide benefits to most or all eligible employees. This can dramatically reduce the owner-favorable design. Many self-employed CB plans only cover the owner (and spouse if also on payroll) to preserve the age-weighting benefit.
When must I set up a Cash Balance Plan for 2027?
By December 31, 2027 for plan adoption. Contributions can be made through your tax return extended due date (October 15, 2028). For first-time plans, sole proprietors get extra flexibility under SECURE 2.0 \u00a7317 \u2014 review with a TPA (Third Party Administrator) early.
Are Cash Balance contributions guaranteed against loss?
Yes \u2014 the plan promises a defined interest credit (typically 4-5%) each year regardless of actual investment performance. If investments underperform, the SPONSOR (you) must contribute additional amounts to make the plan whole. Conservative investing (60% bonds / 40% stock) is typical to manage funding risk.