Cash Balance Plan + Fixed Indexed Annuity — Reasonable or Red Flag?
My financial adviser is recommending setting up a cash balance plan for tax deferral. I’m trying to understand whether the proposed investment structure makes sense.
The adviser is saying that the cash balance plan should be invested conservatively, because the goal is not to maximize returns like a personal brokerage account. Since a cash balance plan promises a formula-based benefit, too much volatility can create underfunding or overfunding issues. That logic makes sense to me.
However, the adviser is proposing funding part of the strategy with a fixed indexed annuity.
My question is: is using a fixed indexed annuity inside/alongside a cash balance plan a reasonable way to manage the stability requirement, or is this mostly a commission-driven product sale?
I understand why 100% S&P 500 may not be appropriate for a cash balance plan. For personal investing, I usually prefer low-cost index funds. But for a cash balance plan, I’m starting to see that the objective may be different: earn enough to meet the plan’s interest crediting assumptions without creating huge funding swings.
What I’m trying to figure out:
- Is annuity funding common or reasonable for cash balance plans?
- Would Treasuries, CDs, MYGAs, bond ladders, stable value, or conservative low-cost bond/index portfolios usually be better?
Any thoughts from those who have used cash balance plans would be appreciated.