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A cash balance plan is a defined benefit retirement plan that maintains hypothetical individual employee accounts like a defined contribution plan.The hypothetical nature of the individual accounts was crucial in the early adoption of such plans because it enabled conversion of traditional plans without declaring a plan termination.
Even if you only invest $50 a month for retirement, if you do so over 40 years and your portfolio gives you a 10% average yearly return during that time, you're looking at about $265,000.
A financial expert could help you create a financial plan for your retirement ... Average 401(k) balance: $6,718. Median 401(k) balance:$2,240 ... SmartAsset’s free retirement calculator can ...
The cash balance plan typically offers a lump sum at and often before normal retirement age. However, as is the case with all defined benefit plans, a cash balance plan must also provide the option of receiving the benefit as a life annuity. The amount of the annuity benefit must be definitely determinable as per IRS regulation 1.412-1.
Talk to financial planners and they’ll tell you that the typical 40-year-old is keenly aware of the need to save, but too few have taken the necessary steps to adequately prepare for retirement.
Cash balance plans, for example, provide a guaranteed benefit like a defined benefit plan, but the benefit is expressed as an account balance, like a defined contribution plan. Pension equity plans are a type of cash balance plan that credits employee accounts with a percentage of their pay each year, similar to a defined contribution plan.
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