A cash balance plan for physicians lets a doctor put away far more pre-tax money than a 401(k) allows, and Annex Wealth Management sizes each contribution or payout choice against your monthly spending plan first. The first step is writing down the monthly gap between take-home pay and spending when the plan decision comes due; a contribution or lump-sum election only makes sense if that gap still closes.
The call with human resources can sound settled until you ask whether reducing hours counts as leaving, when the election deadline falls, or what happens to a beneficiary after divorce. Your statement lists the one-time payout next to the monthly annuity, but it won't tell you which one covers the mortgage and the alimony check. Annex Wealth Management checks those details against your cash flow before you choose.
What does a cash balance plan for physicians change in your monthly numbers?
A cash balance plan for physicians changes how much can be set aside at work or how a hospital benefit turns into income later. For a dentist with an S corporation, it becomes worth examining after the 401(k) is full. In 2026, that means the $24,500 employee deferral plus employer money up to the $72,000 total defined contribution limit; cash balance contributions sit on top, though combined deduction limits apply when both plans run.
An enrolled actuary certifies the required contribution each year for an owner’s plan. Adoption commits the practice to a funding range for several years, not a one-time deposit. Before anyone signs the plan document, Annex Wealth Management checks whether the monthly spending plan can cover the low end of that range in a slow year.
Hospital systems often already offer a cash balance plan to employed physicians like Curtis. His decision is about the payout election when he leaves, not a contribution he can set. An employed physician cannot create this plan on W-2 salary; the available choices are the ones inside the employer’s plan.
Start reviewing about two years before an election or practice decision. Late starters also have less room: the benefit limit is reduced by one-tenth for each year of participation under ten, so adopting at 55 leaves less room than adopting at 45.
Price the annuity against the lump sum before age 62
Curtis (hypothetical), age 57, is a divorced orthopedic surgeon employed by a hospital system. He pays alimony and has one adult son. At age 62, he plans to leave the system for part-time work elsewhere. His statement shows a $300,000 lump sum or a single-life annuity paying $1,800 each month. His colleague is identical except his alimony has ended. Both ask which option to take; their cash flow gives different answers. Annex Wealth Management writes down each man’s monthly gap before reviewing the plan statement.
Curtis spends $14,000 each month, including $3,000 in alimony. Part-time pay brings home $7,000, leaving a $7,000 gap. Multiply $7,000 by 12: he needs $84,000 a year. With the lump sum added to his roughly $1.1 million in other investments, his portfolio is about $1.4 million; $84,000 divided by $1.4 million equals a 6% income draw. That is too high for his plan.
The $1,800 annuity lowers Curtis’s gap to $5,200 each month: $7,000 minus $1,800. That is $62,400 a year. Divided by his other $1.1 million, it implies about a 5.7% draw. Still high. He chooses the annuity, then puts two options in the plan: trim spending by about $1,000 each month or keep part-time work past age 65.
His colleague has a $4,000 monthly gap after alimony ends, or $48,000 a year. Against about $1.4 million with the lump sum, that is 3.4%; with the annuity, the gap is $2,200 each month, or $26,400 a year. Against $1.1 million, that is 2.4%. The lower draw gives him room to roll the $300,000 into an IRA by direct transfer and name heirs as beneficiaries. A single-life annuity would stop at death.
A single-life annuity usually has no inflation adjustment, so $1,800 buys less at age 80 than at 62. The IRA remains invested and can lose value; the colleague could end up with less than he rolled over. If planned income draws in the first years of part-time work exceed about 5% of your portfolio, price the annuity before rolling the lump sum into an IRA. Below about 4%, the lump sum’s flexibility usually costs little.
| Account | How it is taxed | What Curtis does with it |
|---|---|---|
| Hospital cash balance plan | Ordinary income when paid | Takes $1,800 monthly annuity |
| Non-governmental 457(b) | Ordinary income; no IRA rollover | Makes payout election before plan deadline |
| Taxable brokerage account | Capital gains on growth only | Covers first two years of gap |
| 403(b) | Ordinary income; RMDs from age 75 | Fills remaining gap after taxable account |
Does the plan election move your Social Security date and beneficiary forms?
Yes. The election you make shifts what lands on your tax return, can move the date you claim Social Security, and decides what an heir receives. The annuity is taxed as ordinary income each year it is paid; a direct rollover keeps a lump sum untaxed until income draws begin.
If the check is paid to you, 20% is withheld. Your CPA should project the election-year tax before you sign, using the IRS rules that apply to your situation.
Which forms does Annex Wealth Management, your CPA and your attorney handle?
You bring the plan statement, summary plan description, divorce decree or QDRO, and last tax return. Annex Wealth Management builds the spending plan and compares elections; your CPA projects the election-year tax, and your attorney reviews the QDRO and beneficiary forms. The custodian receives a direct rollover and issues Form 1099-R in January. For an owner plan, the enrolled actuary certifies each year’s contribution, while the plan administrator files Form 5500.
A hospital benefits representative may tell Curtis that cutting back to part-time work makes the $300,000 lump sum available. If the plan pays only after separation from service, that advice leaves his $84,000 yearly gap resting on the other $1.1 million, a 7.6% draw. He can catch the error by getting the distribution rule in writing and reading the summary plan description before signing a reduced-hours contract.
What does the finished cash balance review look like on paper?
The finished plan is a few pages, not a stack of projections. It shows the monthly gap at ages 62, 67 and 75, the annuity and lump sum side by side, the income draw each implies, and the account-by-account choices in the table. If an assumption changes, such as Curtis’s part-time pay or alimony ending, the monthly gap and resulting draw rate change too.
It ends with a dated list of the election form, rollover instructions, beneficiary forms and spousal consent if you are married. Each item names who signs it and the deadline. Annex Wealth Management starts with the monthly spending plan; the portfolio is there to fund it, so the recommended election has to work against the bills you expect to pay.
Is your first cash balance plan election less than two years away?
A review makes sense now if your election or separation date is within about 24 months, or your practice has steady profit left after the 401(k) is full and household spending is covered. It can wait if the spending plan has no monthly surplus or practice income swings enough that the actuary’s minimum contribution could strain a bad year. Owner plans also bring annual actuarial and administration costs.
- Review now: election or separation within about 24 months
- Review now: full 401(k) and steady spare practice profit
- Wait: no monthly surplus in the spending plan
- Wait: volatile practice income could strain minimum funding
Take the next step with Annex Wealth Management
Send the request form to discuss the plan statement and decision date; no phone number is published. Annex Wealth Management holds reviews online or by phone for clients from coast to coast. Fees are set out in a written agreement before work begins. Annex Wealth Management requires $500K in investable assets to start. This review is general education, not individualized tax or legal advice. Any investment, including a rolled-over IRA, can fall in value, and you could get back less than you put in.
Questions about a cash balance plan for physicians
Can I take my hospital cash balance plan as a lump sum if I only cut my hours instead of leaving?
Isn't the annuity option just the plan keeping my money if I die early?
How soon before leaving the hospital should I ask for a cash balance plan benefit estimate?
Does a cash balance plan still pay off for a dentist who owns a practice with three employees?
Primary sources
This material is general information only and does not constitute investment, tax or legal advice tailored to your circumstances. Investing involves risk, including possible loss of principal. Before acting on any information here, speak with a financial advisor, tax professional or attorney about your specific situation.