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Planning to sell in the next few years? A cash balance plan can shelter $100,000 to $300,000+ a year of your highest-earning years, then roll into an IRA when you exit.
Plan the exit before you sign the letter of intent.
A free pre-sale retirement plan review
The years before a sale are often an owner’s highest-income years, and the sale itself usually brings a large tax bill. A cash balance plan lets you deduct a large share of that pre-sale income and build a tax-deferred retirement fund that’s separate from the sale proceeds.
When the business sells, the plan is typically terminated, everyone becomes fully vested, and your account rolls into an IRA. The key is starting early enough, usually at least two to three years before the sale.
| When | What happens |
|---|---|
| 3 to 5 years before the sale | Adopt a cash balance plan alongside your 401(k) and start large annual contributions |
| Each year until the sale | Contribute within the actuary’s range and invest conservatively to avoid overfunding |
| During sale negotiations | Decide whether the plan terminates before closing or the buyer takes it over |
| At or after closing | Terminate the plan, fund any shortfall, and roll accounts into IRAs |
A 56-year-old owner plans to sell in four years and earns at least $360,000 a year.
| Year | Owner age | Approximate cash balance contribution |
|---|---|---|
| 1 | 56 | About $295,000 |
| 2 | 57 | About $305,000 |
| 3 | 58 | About $315,000 |
| 4 | 59 | About $320,000 |
| Total | About $1.2 million, deducted before the sale |
Hypothetical example for illustration only. Actual contributions are set by the plan’s actuary and depend on age, compensation, employees, and plan design.
From first call to first contribution, we handle the design, the math, and the compliance.
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We look at your income, age, staff census, and current plan to see what’s possible.
We layer your 401(k), profit sharing, and cash balance plan around your tax goals.
You get a clear illustration of your deduction, your savings, and your staff cost before you commit.
Plan documents, annual actuarial work, testing, and filings, handled every year.
Michael, a successful business owner with no employees, wanted to maximize his retirement savings while minimizing taxes.
Through a custom-designed retirement plan stack, he and his wife were able to contribute over $575,000 across multiple plans in a single year.
This strategy not only helped secure their financial future but also generated over $222,000 in immediate tax savings, significantly increasing their cash flow and long-term wealth-building potential!
James runs a construction company with high employee turnover and wanted a way to protect cash flow while maximizing retirement contributions.
Through a custom 401(k) and profit-sharing plan design, we used strategic eligibility and vesting schedules to limit costs from short-term employees while allowing ownership to maximize contributions.
This strategy protected company assets, controlled expenses, and helped James build significant retirement wealth.
Eileen, a small business owner, needed a low-cost retirement plan that would meet state mandate requirements while helping her recruit and retain high-quality employees.
Eileen used a customized 401(k) solution focused on minimizing expenses, giving Eileen a competitive edge in hiring without pulling resources away from reinvesting in her growing business.
By using tax credits, her design allowed her to stay compliant, attract top talent, and keep her financial priorities aligned.
*These are hypothetical clients with hypothetical situations and plan designs.
Learn more: Catching Up in Your 50s | Adding a DB Plan | Tax Strategies for Business Owners | The Retirement Plan Stack | About Us
Often, yes, if the sale is at least two to three years away. You can deduct large contributions during your highest-income years and roll the account into an IRA after the sale.
Usually the plan is terminated before or at closing, all participants become fully vested, and accounts are paid out or rolled into IRAs. In some deals, the buyer takes over the plan.
Yes, if there’s a legitimate business reason such as a sale. The IRS expects plans to be permanent, so terminating soon after adoption without a business reason can raise questions.
The business may need to make a final contribution so everyone receives their full promised balance before the plan terminates.
Excess assets that revert to the employer face a steep excise tax. Conservative investing and careful contribution planning help avoid this.
Not directly. It reduces taxes on your business income in the years before the sale. Your CPA and deal advisors handle the taxes on the sale proceeds.
Ideally three to five years before, so you can make several years of large contributions.
Life, Inc. Retirement Services does not offer tax advice. Please always consult your tax professional about your eligibility for tax credits.
Life, Inc. Retirement Services is a Registered Investment Advisory Firm of the state of Ohio and licensed in Florida and Maryland. All emails and communication are meant to be informative and educational and should not be considered a sale of security until proper notification and disclosures are given.