An example
For a 57-year-old advisor who runs a one-person registered investment adviser as an S corporation, the 2026 figures work out like this:
- Cash balance plan, first year
- $285,000
- Solo 401(k) alongside
- $48,000
- Both plans
- $333,000
- A Solo 401(k) on its own
- $80,000
- Federal income tax saved
- $82,100
Federal income tax only, compared with making no retirement contributions. State tax saved depends on where you live: see savings by state. An illustration from the same calculation as the estimate, not a quote.
Financial advisors are generally a specified service business for the 20% qualified business income deduction. Above the income threshold that deduction phases out, and a contribution that brings taxable income back down can restore part of it. How the deduction interacts with contributions
Who in the industry fits
- A solo RIA owner with no employees. Fits.
- An independent representative paid fees and commissions on a 1099 through a broker-dealer, operating through their own business with no staff. Fits.
- An advisor with a paraplanner or client service associate on the payroll. That person is an employee, and a one-person plan no longer fits once they meet the plan's age and service conditions.
- A partner in an ensemble practice or larger RIA with staff. Generally not. The firm is the employer, its employees count, and partnership income belongs to the firm's plans.
- An advisor employed on a W-2 by a bank, wirehouse or RIA. Not for that income.
See who can have a solo cash balance plan for how related businesses are counted, including a separate insurance agency you own that has staff.
When markets fall, both sides move
Most advisors are paid a percentage of assets under management, so revenue falls with the market. The plan's assets fall at the same time. If the plan credits your account with the actual return on its investments, the account follows them down, and weak returns can raise the minimum you must contribute in later years, because the plan is further from funding the benefit it promised.
So a bad market can lower your income and raise your required contribution in the same stretch. The usual ways to leave room for that are setting pay credits below the maximum when the plan is designed and contributing toward the top of the range in strong years. See minimum contributions and lean years.
Your own plan's money
As trustee of your own plan, you choose its investments. A few rules apply that do not apply to client accounts:
- A plan that credits actual returns must keep its investments diversified so as to minimize the volatility of returns. A concentrated position does not meet that standard.
- Paying your own firm an advisory fee out of the plan's assets is the kind of self-dealing the prohibited transaction rules address. Talk to counsel before doing it.
- The plan's account is opened in the plan's name, with its own tax ID, separate from your business and personal accounts.
Maxed does not give investment advice, and nothing here is a recommendation. See investing cash balance plan assets.
Financial services and investment management are on the specified service list, and the regulations name wealth management, financial advice and developing retirement plans for clients. Above $553,500 of taxable income for a married couple ($276,750 single), an advisory business gets no QBI deduction.
Selling your book of business
Many solo advisors eventually sell their client relationships to another advisor, often with payments spread over several years. How those payments are structured affects the plan.
- Payments for the business itself, including goodwill, are not earned income and cannot support a contribution.
- Payments under a consulting or transition agreement for work you actually do after the sale are self-employment income and can, for as long as they last.
A sale is also a common reason to end a plan, and a legitimate one. Because the plan's minimum contribution depends on earned income continuing, it helps to plan the last contribution and the termination around the sale date. See closing a cash balance plan.