Schwab Cash Balance Plan: Is it a Viable Option?

As you look to set up retirement plans for your small business, you have many options, of which Schwab’s name most likely comes up as they are a significant investment firm. Is a Schwab cash balance plan viable, or should you look elsewhere?

While Schwab doesn’t have a ‘cash balance plan’ per se, they offer a Personal Defined Benefit Plan, which works similarly. As an employer, it’s essential to know the full details of starting any retirement plan for your employees and how to create it.

These plans can be difficult to understand. So, let’s get started!

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Do you Have to go Right Through Schwab?

Here’s the most significant misconception. Many people believe in using Schwab for their employer retirement plans. They must go directly through Schwab. While that’s an option, there may be more viable options for small businesses like yours. 

Small business owners need guidance, advice, and help through the complex process. It would help if you also had choices. You need to know your options and the pros and cons of each. If you go directly through a brokerage like Schwab, you need help finding that. Yes, they offer a great selection of investments, and they handle the ‘complex actuarial work’ for you, but you need more than that, which is where we come in to help.

You can have a third-party administrator and a custodian when you open a cash balance plan or any other pension trust. Your custodian, in this case, maybe Schwab. Your third-party administrator could be us. We help you design and facilitate your plan while investing it through Schwab.

The Benefits of Using us as Your Plan Administrator

You’re treated like a number when you go directly through a brokerage like Schwab. You are given a one-size-fits-all approach to investing that may or may not work great for you. Their expertise is in institutions or big businesses that can weather different storms than you can as a small business.

Using us as your plan administrator, you get a customized plan. We don’t make ‘one-size-fits-all’ approaches. We are flexible, patient, and customizable. We listen to your company’s needs, capabilities, and revenues. We have come up with an affordable plan for you and attractive to your employees.

We don’t limit your investment options – instead, we open your eyes to the vast number of options available. We aren’t just talking stocks, bonds, and mutual funds. We’re talking diversification in investments, such as real estate, mortgage notes, and private equity. We’re happy to discuss diversification and how it can help your company – our specialty.

What We Can Offer

What can we offer your business, even if you have your mind set up using Schwab for your personal defined benefit plan? Check out the benefits:

· We simplify your retirement plans, breaking them down to understand every step we take. We take a team approach, working with you every step of the way.

  • We’ll design a custom plan based on our conversations and the documents you provide. We’ll discuss the plan with you and make any changes that you deem necessary.
  • We’ll create your plan documents. Why put yourself through the complicated process of preparing paperwork for you when we can handle it? We are the experts, after all.
  • We’ll illustrate the plan created by our actuaries so that you can see our vision and your desires all in one place.
  • We’ll work closely with your CPA or tax professional to ensure all aspects of your finances are on the same page.

What we won’t do is manage your money. We provide the advice and the plans; your custodian of choice manages your money. There isn’t any conflict of interest, so you can trust our advice and know that it has your best interests at heart, not our commission check.

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Setting up Your Retirement Plan

Setting up your retirement plan with us, your administrator, and Schwab as your custodian is simple. Just follow these steps:

  • Choose us as your third-party administrator.
  • To set up your plan, as we discussed above. We will put something into place once we agree on the plan.
  • Open your account with Schwab.
  • Sure that Schwab seamlessly integrates with our plan and gets your account set up. If you need help, just let us know, and we’ll walk you through it.
  • Choose your investment allocation.
  • This is where our actual value shines. We’ll help you choose the correct asset allocation so that your investments are diverse and your goals are met.
  • Fund your account
  • Don’t worry. You don’t have to fund your account entirely right away. You have time! If you partially fund it initially, that works well too. You have until your tax filing date, usually April 15, to fund the account entirely. If you apply for an extension, you’ll have until October 15.
  • Get your accountant on board.
  • Forget to include your accountant in all of this. You want all financial professionals on the same page, not just your tax accountant. Your CPA will better know the plan and how it affects your taxes/finances.

What you choose for your plan’s custodian is a personal choice. We can guide you along the way but ultimately want you to make that decision. If you decide on Schwab, you’ve chosen a viable alternative, but ensure you have a quality third-party administrator overseeing the plan. We are a neutral third party that can help you put the plan in place to provide you with the desired outcome for your employees while saving you money. 

Paul Sundin

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