Cash Balance Plan vs 401(k)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 29, 2023

A cash balance plan is similar to a 401(k); it is an employer sponsored retirement package that grows over the employee's time at the company.

However, unlike a 401(k), a cash balance plan grows either by direct contribution or by interest, rather than the performance of investments.

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Can You Roll a Cash Balance Plan into a 401(k)?

You can roll over a cash balance plan into a 401(k) or an IRA by taking it out as a lump sum after leaving your job.

There is no penalty to doing so even if it is done before retirement age (59 ½ years).

Cash Balance Plan vs 401(k) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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