A high-earning solo practitioner combines a Cash Balance Plan with a Solo 401(k) to shelter over $300,000 pre-tax, cutting federal and state taxes by $118,000 yearly.
A 58-year-old solo consultant earning $480,000 annually is using a Cash Balance Plan to defer $312,000 in federal taxes each year. The strategy layers on top of a maxed-out Solo 401(k), which already shelters $80,000 pre-tax through employee deferrals and employer profit-sharing.
The Cash Balance Plan allows additional annual deferrals of $190,000 to $240,000, bringing total pre-tax sheltering to $305,000 to $355,000. The approach requires a 3- to 5-year funding commitment and annual actuary fees of $1,500 to $3,500, making it viable only for stable, high-income solo practitioners without employees.
The consultant’s 2025 net Schedule C income of $480,000 places her in the top federal tax brackets, prompting the use of this strategy to reduce taxable income. Future Roth conversions during low-income retirement years are planned to optimize tax efficiency.