If you’re a business owner or high-income earner, you’re probably looking to reduce your annual tax burden and boost your retirement savings. Combining a 401(k) and a cash balance plan can be a powerful retirement strategy to help you accomplish those financial goals.
Layering a cash balance plan onto your 401(k) plan can help you maximize your savings for retirement and potentially minimize the taxes you pay every year.
For best results, consider working with a financial professional who can offer your company a comprehensive retirement package. FinancialFocus Retirement Plan Services can help you identify business objectives and develop a plan that complies with IRS regulations.
Here’s a closer look at combining 401(k) and cash balance plans.
Understanding Retirement Savings Plans
A 401(k) is a defined contribution plan that allows an employee to contribute a percentage of their salary to a tax-deferred retirement account. Employers typically match employee contributions up to about 6%.
Annual contributions are limited to $23,500 in 2025. The limit increases to $31,000 with the catch-up amount if you’re 50 or older, or to or $34,750 if you’re between ages 60 and 63, for a new “super” catch-up contribution.
A cash balance plan, meanwhile, is a defined benefit plan that functions like a pension plan but also somewhat like a 401(k). The difference is that an employer credits your account with a percentage of your salary plus interest. Cash balance plans allow significantly higher contributions; in some cases, more than $300,000 annually.
Better Together
Making use of a cash balance plan and a 401(k) together offers several benefits, including:
Higher contribution limits than a 401(k), allowing you to save more
Tax-deductible contributions that provide annual savings on taxes
Tax-deferred growth until you withdraw the money in retirement
Flexibility to customize a retirement strategy
By using the two plans together, you also add diversity to your retirement strategy. A cash balance plan can provide a conservative investment base while you invest aggressively in growth assets in the 401(k) plan.
Annual Contribution Examples by Age Group
Note there is a lifetime limit and the specifics of your cash balance plan can impact the maximum contributions, so be sure to work closely with a qualified pension consultant. Here's a table of potential combined annual contributions by age group:
| Age | 401(k) | 401(k) With Profit Sharing | Cash Balance | Total |
| 30–34 | $23,500 | $70,000 | $81,000 | $151,000 |
| 35–39 | $23,500 | $70,000 | $103,000 | $173,000 |
| 40–44 | $23,500 | $70,000 | $132,000 | $202,000 |
| 45–49 | $23,500 | $70,000 | $170,000 | $240,000 |
| 50–54 | $31,000 | $77,500 | $218,000 | $295,500 |
| 55–59 | $31,000 | $77,500 | $280,000 | $357,500 |
| 60–65 | $31,000 | $77,500 | $342,000 | $419,500 |
| 66–70 | $31,000 | $77,500 | $383,000 | $460,500 |
The maximum cash balance plan contributions are based on IRS limits. Your contributions may be higher or lower based on your age, income, plan design, and actuarial review.
Candidates for a Combined Retirement Strategy
A combined 401(k) and cash balance plan can be a good choice for business owners, key executives, employees who earn more than $250,000 annually, and self-employed professionals, such as accountants and real estate agents. The potential benefits can accrue to anyone looking to:
Seek higher contribution limits
Supercharge tax savings
Increase tax deductions
Attract and retain employees
Safeguard assets
Retire comfortably
If you want to save aggressively and reduce your taxes, this may be the retirement strategy for you.
Other Considerations
Layering 401(k) and cash balance plans can be complicated. The plans must comply with IRS requirements, including nondiscrimination testing, to maintain tax-qualified status and avoid penalties. Nondiscrimination tests show that all employees can access retirement plans.
Find a Pension Specialist for Your Retirement Strategy
At FinancialFocus Retirement Plan Services, we specialize in helping business owners and high earners like you explore the full potential of their retirement plans. Our team goes beyond basic administration, delivering customized solutions that integrate seamlessly with your financial goals. Whether you’re starting a new plan or evaluating an existing one, we provide end-to-end support including plan design, compliance testing, document installation, and fiduciary oversight.
Email me today at info@ff401k.com to learn how a combined 401(k) and cash balance strategy could work for your firm or your clients. Let’s build a plan that maximizes contributions, minimizes taxes, and positions you for long-term success.
About Kenny Phan
Kenny Phan is a Managing Partner/Pension Consultant at FinancialFocus Retirement Plan Services. He works as a pension specialist who partners with financial professionals to design and implement pension plans. His area of expertise is customized defined benefit, defined contribution, and 401(k) plans. Serving financial advisors and businesses around the nation, he is supported by FinancialFocus Retirement Plan Services. Together, they provide comprehensive plan design consultation, administration, document installation, compliance testing, as well as IRS and DOL reporting for qualified retirement plans.