By Iván M. Mendoza, CFA, CFP, CLU, ChFC, CDFA
If you’re a small business owner in Miami, or a CPA serving clients in that space, you’ve probably realized that traditional retirement plans like 401(k)s may not go far enough. That’s where a cash balance plan comes in. This powerful tool can help small business owners and their advisors accelerate retirement savings, significantly reduce taxable income, and add real value to long-term financial planning.
At Mendoza Private Wealth, we specialize in helping small business owners and their CPAs navigate complex retirement strategies like these. This article will walk you through why a cash balance plan might be exactly what your business needs.
What Is a Cash Balance Plan?
A cash balance plan is an employer-sponsored retirement savings plan with characteristics of defined benefit plans (pension plans) and defined contribution plans, such as 401(k)s. A cash balance plan is often called a hybrid plan because benefits are based on individual accounts, similar to a 401(k), but benefits are guaranteed, making it a defined benefit plan, like a pension.
As a small business owner, you can contribute much higher tax-deferred amounts annually to a cash balance plan than to a 401(k) or IRA. And on top of that, you can still put money away in your 401(k) or profit-sharing account.
Depending on your age, income, and the design of your plan, you could stuff a six-figure contribution in your nest egg in 2025, potentially as much as $300,000 or more. You wouldn’t pay any taxes on the contribution or gains until you take your money out.
Employers are responsible for funding cash balance plans. As the business owner, you make the contributions to your employees’ accounts, helping them build significant retirement savings while ensuring compliance with IRS requirements.
Why Small Business Owners Might Use a Cash Balance Plan
At Mendoza Private Wealth, we’ve helped design and implement cash balance plans for a variety of businesses, particularly small physician groups and boutique law firms. These are often practices with partners who carry significant student loan debt and have spent years reinvesting in their business before finally hitting their stride financially.
Consider this: the average student loan debt is around $264,000 for medical school graduates and $130,000 for law school grads. Add in the reality that it may take two to three years for a practice to turn a consistent profit, and it’s no surprise that many professionals delay saving for retirement. But once income starts to rise, so does the tax bill, often dramatically.
A cash balance plan does the following:
- Allows large contributions so you can catch up on retirement savings
- Reduces your taxable income
- Shields your money from creditors and lawsuits in some states like Florida
- Benefits support staff, aiding recruitment and retention
The account balance allowed by the IRS is adjusted for inflation each year. In 2025, you can accumulate about $3.6 million by age 62 and $3.8 million by age 68.
Working With CPAs
At Mendoza Private Wealth, we view CPAs as essential partners in crafting smart, tax-efficient retirement strategies. For high-earning clients with predictable income, a cash balance plan can significantly reduce tax liabilities while accelerating retirement savings.
We work directly with CPAs to ensure each plan is tailored to the client’s income structure and long-term goals. From feasibility to implementation, we provide the guidance, and you remain the trusted tax advisor.
If you’re a CPA with clients looking to lower their tax bill and build wealth faster, let’s discuss how we can collaborate.
Explore a Cash Balance Plan With Mendoza Private Wealth
For business owners and CPAs serving high-income clients, a cash balance plan can be a powerful tool in a broader retirement strategy. These plans allow for higher tax-deferred contributions, especially useful during peak earning years.
At Mendoza Private Wealth, we help simplify complex planning decisions. If you’re considering ways to manage taxes and grow retirement savings, schedule a Fit Meeting here.
About Iván
Iván M. Mendoza is the Managing Principal and a Financial Advisor for Mendoza Private Wealth, a fee-only boutique, private wealth management practice with a focus on research, planning, and investment management. Working with clients in Miami and throughout South Florida, Iván provides investment and wealth planning advice to individuals and families and to their respective trusts, estates, foundations, endowments, and pension plans.
Iván began his career with Prudential in 1999, where he quickly advanced to Manager of Financial Services, overseeing a team of financial planners. In 2012, he joined Sanford C. Bernstein’s private client group as Vice President and Financial Advisor. Driven by his commitment to providing objective advice, he founded Mendoza Private Wealth in 2016. Iván holds multiple designations, including CFA®, CFP®, CDFA®, CLTC®, CLU®, and ChFC®, and is passionate about creating confidence in clients through sound financial planning and investment strategies.
A first-generation American of Peruvian heritage, Iván resides in Miami with his wife, Ana, and their two sons, Emiliano and Alessandro. He enjoys traveling, discovering new restaurants, all things science, World Cup soccer, and staying active through running and biking. An advocate for education, he draws inspiration from his grandfather, a former Minister of Education in Peru, and supports educational causes in his community. Iván is also a music enthusiast with a wide range of tastes, from jazz to reggae to heavy metal. To learn more about Iván, connect with him on LinkedIn.
Mendoza Private Wealth is a financial advisory firm. The information provided in this article is for informational purposes only and should not be construed as legal advice. Mendoza Private Wealth does not offer legal services. For legal advice, please consult with a qualified attorney who can address your specific needs.
