This podcast discusses cash balance plans, a type of retirement account that combines elements of defined contribution plans and defined benefit plans. They explore who should consider a cash balance plan, the tax benefits, managing losses in the account, and the availability of automatic emergency braking in vehicles. Guest speaker Dr. Victor Mangona provides expertise on these plans and how to get your practice to adopt one.
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question_answer ANECDOTE
How Expertise Drove Adoption
Victor developed expertise to convince a large 400+ physician group to adopt the plan after years of prodding.
He needed deep knowledge to answer partners' concerns and design the plan for adoption.
volunteer_activism ADVICE
Capture Permanent Payroll-Tax Savings
Use employer side contributions to bypass payroll taxes and capture permanent savings like the employer Medicare share (~1.45%).
Owning the business doubles that payroll-tax avoidance, yielding a guaranteed tax benefit.
volunteer_activism ADVICE
Conservative Plan Investing
Invest plan assets conservatively to limit liability to the business and participants.
Consider a balanced index mix (e.g., 40/60 stocks/bonds) to reduce risk of large crediting shortfalls.
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A defined benefit cash balance plan https://www.whitecoatinvestor.com/cash-balance-plans-another-retirement-plan-for-professionals/ is a somewhat unusual and surprisingly physician specific retirement account. It is a type of a defined benefit plan. On one end you have a defined contribution plan like a 401(k) and on the other a defined benefit plan or pension plan. A cash balance pension, a subtype of defined benefit plan lies as kind of a hybrid between the two. It still falls in the category as a defined benefit plan, but it's purpose is designed not so that you have an annual income distribution after you retire but that you take the lump sum. Confused? Don't worry, we have Victor Mangona, who has developed an expertise in these plans, as our guest this episode. We discuss who should consider a cash balance plan, how much money can be put into a plan, the tax savings from using this plan, how to invest these assets, what happens if there is a loss in the account, and most importantly how to get your practice to adopt a cash balance plan so you can take advantage of these great accounts.
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