The Smart Woman’s Tax Play: How High-Earning Entrepreneurs Can Use 401(k) Profit Sharing and Cash Balance Plans to Keep More of Their Money

For ambitious women building businesses and wealth, there comes a point when simply “maxing out a 401(k)” isn’t enough. The income grows, the tax bill grows with it, and suddenly you realize the system rewards those who play the game strategically.

One of the most elegant and underutilized tools in that playbook? Pairing a 401(k) profit sharing plan with a cash balance plan.

This isn’t just retirement planning — it’s a strategic wealth-building lever designed for founders, consultants, and high-earning professionals who want to keep more of what they earn.

Case Study: A Business-Owner Couple Defers $265,000 and Saves $84,800 in Taxes

Let’s take a look at a real-world model that was built out using hypothetical numbers to understand the potential benefits. This scenario looks at an S-Corp with 2 married co-owners each with an annual salary of $150k.

	Salary	Employer Contribution	Employee Contribution	Total Contribution	Estimated Tax Savings*
	$150,000	$104,000	$23,500	$127,500	$40,800
	$150,000	$114,000	$23,500	$137,500	$44,000
Total	$300,000	$218,000	$47,000	$265,000	$84,800

*Based on a 32% marginal tax rate.

By strategically combining plans, this couple deferred $265,000 and reduced their current tax bill by nearly $85,000 in one year.

How This Power Move Works

Traditional 401(k) + Profit Sharing

Each person defers $23,500 through employee elective deferrals. Their business also contributes $9,000 each through profit sharing.

Cash Balance Plan

This is where the strategy flexes its real muscle. Note that due to age differences contributions vary slightly.

• One contributes up to $95,000

• Another contributes up to $105,000

  
  

Cash balance plans allow for significantly larger tax-deferred contributions than traditional 401(k)s. This is especially beneficial for business owners in their late 30s and beyond.

Tax Deferral at a High Marginal Rate

At a 32% tax rate, this couple defers $265,000 AND keeps $84,800 that would have gone to taxes. That’s money that can compound, not evaporate.

When This Strategy Makes Sense

This isn’t a “one size fits all” strategy. It’s most impactful when it aligns with your business stage, income level, and tax planning goals.

You’ll typically see the biggest benefits when:

• Your business is consistently generating $200,000+ in annual income

  
  

• You have a lean team or control contribution structures

  
  

• You’re seeking to lower taxable income in a high tax bracket

  
  

• You want to accelerate retirement savings or diversify wealth outside your business

  
  

But — AND THIS MATTERS! — it doesn’t make sense to rush into it.

Cost, Complexity, and the Self-Employment Tax Factor

Before leaping into advanced retirement plan structures, let’s talk trade-offs because of course there is no such thing as free lunch:

• Plan Administration Costs: Cash balance plans require actuarial calculations and annual administration. Expect around $3,000–$5,000 annually for setup and maintenance.

  
  

• Minimum Contribution Commitment: Once established, these plans often require annual funding for a set number of determined years. This isn’t a “set it and forget it” strategy. It’s a long-game move.

  
  

• Self-Employment Tax Considerations: If you’re an LLC taxed as a sole prop or partnership, contributing more may not reduce self-employment tax (which applies before the retirement contribution is made).

  
  

This is where entity structure matters:

• Remaining an LLC/sole prop means you may still owe self-employment tax on all earnings.

  
  

• Electing S-Corp status allows you to pay yourself a reasonable salary and potentially lower that SE tax burden.

  
  

But — switching to an S-Corp too early (usually under $60K–$80K in net income) can actually increase your administrative costs without meaningful tax benefit.

Timing the Move Like a Pro

The sweet spot for adopting a 401(k) + cash balance combo typically looks like this:

Indicator	Optimal Timing Signal
Consistent business revenue	$200K+ annually
Your income exceeds basic 401(k) max	$23,500 contribution feels limiting
Desire to reduce taxable income	28%+ tax bracket
Long-term business outlook	Strong growth, not volatile
Willingness to commit	5+ years of contributions preferred

This strategy shines when you’ve outgrown “basic” tax deferrals and want to create a structured wealth vehicle that compounds alongside your business.

Not Yet, But Soon: What to Do in the Interim

If you’re not at this stage yet that’s completely okay! Awareness now means you’ll be ready when you hit that inflection point.

Here’s what ambitious women should already be doing in the meantime:

• Max Out a Traditional or Solo 401(k): Use the standard employee deferral limit ($23,500 for 2025). Even at this level, your money compounds and reduces taxable income.

  
  

• Establish a SEP IRA (if eligible): A simple, flexible way to make employer contributions without the complexity of a cash balance plan.

  
  

• Build a Tax Strategy Early: Get in the habit of quarterly estimated tax planning and track what percentage of revenue goes to taxes, payroll, and reinvestment.

  
  

• Revisit Your Entity Structure: If your business is growing steadily, begin conversations with your CPA about when (not if) an S-Corp election might make sense.

  
  

• Automate Wealth Building: Even without large retirement contributions, automatically funneling a set percentage of income into investments or reserves builds a strong financial foundation.

  
  

Remember: not implementing this strategy now doesn’t mean you’re behind. It means you’re in position to move strategically when the numbers line up.

A Savvy Woman’s Edge

Women founders often scale to multi-six figures but wait too long to explore advanced tax planning. By the time they do, they’ve already handed over tens (or hundreds) of thousands in unnecessary taxes.

Leveraging structures like this allows you to:

• Control your tax narrative instead of reacting to it

  
  

• Build parallel wealth outside your business

  
  

• Position for legacy and financial independence faster

  
  

The Atelier Perspective

At The Ambition Atelier, we talk a lot about elegant power moves. This is one of them.

A 401(k) profit sharing and cash balance plan combo isn’t for everyone — but for women earning above that critical $200K mark, it can be a transformative wealth lever.

Think of it less like “saving for retirement” and more like reallocating money to your own future.

For ambitious women entrepreneurs:

• Don’t adopt this strategy too early. Timing is everything!

  
  

• Use interim strategies to build your financial foundation now.

  
  

• When the numbers align, this structure can create a five-figure annual tax swing in your favor.

  
  

• Get the right CPA, financial planner, and actuary team to tailor it to your business.

  
  

Your business success shouldn’t just create revenue. It should build enduring wealth.

Disclaimer

This article is for educational purposes only and does not constitute legal, tax, or investment advice. Always consult a qualified tax professional before implementing.