Since the dawn of time, business owners have put all their savings into setting up their businesses. However, when they see their dream comes true through their tangible business. It feels surreal. Nevertheless, business is a lifelong investment, and it requires fodder time and again. Yet, many business owners, after retirement, end up with nothing in their hands. This will not be the case if you opt for Cash Balance Plans. If you do not already know about it, read the whole article.
What Is a Cash Balance Plan?
Cash balance plans can roughly be summed up as a cumulative deposit you do per year. To elaborate further, only business owners can deposit this money until their retirement. Subsequent to it, they can avail it of once they retire. However, there is a limit to this plan as well. Note that you cannot deposit more than $4, 00,000 per annual year. You can also refer it to a small business 401k plan. The end-to-end motive of a cash balance plan is to protect you from paying taxes in the near future.
What Is a Safe Harbor 401k Plan?
Now that you know what cash balance plan is, you must also know about the safe harbor 401k plan. Well, first thing first, a safe harbor plan is one of the types of 401k plans. Like a cash balance plan, it is yet another retirement plan for business owners. However, one of the major lines of demarcation between a cash balance plan and a safe harbor plan is its audience. Small business owners opt for safe harbor 401k, whereas big and established business owners call for a cash balance plan 401k. Another highlighted difference in the safe harbor plan is that it easily sails through non-discrimination tests.
To Sum It Up
In conclusion, be it a cash balance 401k plans or a safe harbor 401k plan either has the reliability to offer. Thus, you should not have qualms in signing for these 401k plans. However, make sure to resonate your business with the plans' eligibility.
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