Self-employed retirement plans San Jose, CA. The freedom of owning your own business in San Jose, CA is one of the greatest advantages of having a self-directed career. However, this flexibility often comes with potential drawbacks, particularly regarding planning for retirement, as you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, yet countless should consider exploring their options. In addition to achieving a more comfortable retirement, partnering with a financial advisor in San Jose, CA to create your self-employed retirement plan offers significant tax advantages that allow your business to grow and succeed.
Few San Jose, CA wealth management and retirement planning firms are as attuned to the requirements of self-employed individuals better than Correct Capital. Our founder's father was a small business owner himself (read more of our story here), and our firm are deeply experienced in assisting business owners in their retirement planning needs. We know that your goals for your business and retirement go far beyond basic numbers, and we are dedicated to provide customized solutions aligned with your vision. Read on to discover about your self-employed retirement plan options in San Jose, CA, or call Correct Capital at 877-930-401k or contact us online to speak with a self-employed financial advisor in San Jose, CA today.
Why San Jose, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also provide immediate benefits today. Offering flexibility in contributions to considerable tax savings, consulting a financial advisor in San Jose, CA helps you design your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) offers the flexibility to tailor how much you save:
- Customizable Contributions: Set aside more during successful years and cut back when your earnings dip, ensuring your plan fits your financial situation.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, so you can withdraw tax-free later—a smart decision if you believe your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to grow.
- State-Specific Incentives: Depending on where you live, you may be eligible for additional tax breaks as a business owner. These regional incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across different stocks, bonds, and other assets is a smart way to reduce risk while continuing to build your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund helps you avoid using your retirement funds during tough times and facing tax penalties.
Plan for the Future of Your San Jose, CA Business
Preparing for retirement enables you to plan ahead for what’s next with your San Jose, CA business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s stay in your name and won’t be included in the sale. These accounts offer the steady income you’ll need during retirement. Keep in mind that while selling your business results in a capital gain, deposits into these plans are capped at annual limits (e.g., up to $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, factoring in catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings can reduce the taxes you’ll owe when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts offer financial security through the transition. You might want to partner with a financial advisor experienced in both succession and retirement strategies to reduce taxes on the sale.
With the best-fit retirement strategy, you gain control over your financial future, lower your tax bill, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in San Jose, CA Now?
Time is one of the most crucial assets in retirement planning. Starting early not only allows you to build a larger nest egg but also minimizes the financial burden of playing catch-up as you get older. Here’s why it is beneficial to start now:
The Cost of Waiting
Putting off saving for retirement can have a significant impact on the total you’ll have when you stop working. The biggest reason is compound interest—the financial principle where your investments grow, and those returns, subsequently, accumulate even more returns. The greater time span your money has to grow, the more significant the benefit of this growth.
Example: Two individuals, Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but contributes $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex puts in $180,000 and achieves a total of $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily may result in impressive growth. Take a look at this scenario showing the power of consistent growth:
- Starting at age 25: If you invest $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
Starting sooner, the less you need to save each year to achieve your retirement goals.
*The figures provided in this example represent estimates generated with NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are meant to provide general guidance and do not guarantee future performance. Actual results may vary based on elements like market conditions, fees, and your unique situation. Always consult a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in San Jose, CA, it is often the case that you prioritize reinvesting in your business over saving for retirement. That said, beginning a plan now gives you the chance to:
- Benefit from tax-free future growth or tax-free withdrawals in the future.
- Enjoy flexible contributions that change with your income.
- Create a financial cushion that provides security, no matter how your business evolves.
The sooner you start, the less you’ll need to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the ability to turn your attention to your dreams—both for your future retirement and your San Jose, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for entrepreneurs in San Jose, CA, each offering its own advantages and considerations. A financial advisor will guide you to learn about the pros and cons of each choice and identify the one best suited for your unique situation. In most cases, your self-employed retirement plan options in San Jose, CA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that provide key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and investment earnings grow tax-deferred, but retirement distributions are taxable. In contrast, Roth IRA contributions using income already taxed, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals don’t incur penalties if you are at least 59½.
Eligibility: Unlike plans linked to your job, IRAs, including traditional and Roth options are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that allows self-employed individuals to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role beyond the 25% you (the employer) allocate. If you have employees, it's required to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs works well for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs don’t have costly startup or administrative fees.
SEPs work like standard IRAs, where the contributions are tax-deferred and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed intended for businesses with no employees or where the only employee is a spouse. This type of plan function similarly to standard 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the additional opportunities often come with more constrained investment avenues. With this type of plan, you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you can make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employed earnings, up to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your net self-employment income, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 if you're over age 50 (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that provides a pre-established payout to self-employed individuals upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but allows self-employed individuals to know what they'll get in retirement. This plan is best suited for high-earning entrepreneurs who want to save a substantial amount for retirement and are prepared to contribute larger deposits. Contributions are tax deferred, and withdrawals are taxable as income during retirement.
Eligibility: Entrepreneurs operating a solo business or with a small staff of under five may establish an individual defined benefit plan, but it's most commonly advised for those over 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans include:
- Entrepreneurs who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Companies with proven consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or boost savings within a short timeframe
Contribution Limits: The cap on contributions must be determined by an actuary using your earnings, age, and retirement objectives. Contribution limits are updated yearly.
The Importance of a Financial Advisor in San Jose, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in San Jose, CA focused on self-employed retirement strategies can be an essential partner for entrepreneurs. They bring the skills needed to understand the intricacies of saving for retirement and design a tailored strategy that aligns with your goals. A financial advisor in San Jose, CA will evaluate your financial situation, understand your risk tolerance, and assist you in making informed decisions about saving and investing for retirement. Included in what we do for you includes:
- Guide you in choosing a plan that best fits your needs and goals
- Further adapt the plan to your specific situation even further
- Adopt a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Offer continued financial education and guidance to help you navigate your retirement journey
- Maximize what you receive in retirement by making the most of your social security
Self-Employed Retirement Plans in San Jose, CA: Correct Capital's Process
Entrepreneurs in San Jose, CA who lack the time, interest, or knowledge to handle their own retirement planning on their own can become overwhelmed as they look at their available plans. At Correct Capital, our San Jose, CA financial advisors take on the bulk of your savings plan setup for you, to help make meeting your financial objectives as easy as possible for you. We can help you get set up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: In just 20 minutes, a member of our advisor team will assess if our services align for you and your business. This short conversation helps us get a sense of your goals with no obligation or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including how many employees you have (if any), your present financial standing, and your long-term savings targets. This enables us to craft a custom plan designed just for you.
- Review Your Plan: Once we've developed a plan based on the information you provide, we'll sit down with you and review your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. Over the course of our partnership, we'll have regular meetings and track your progress to make sure it remains aligned with your goals.
Our San Jose, CA financial advisors and retirement plan consultants are fiduciary advisors, meaning they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in San Jose, CA include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in San Jose, CA
Your business isn't "just a business" to you, and your San Jose, CA financial advisors must deliver more than basic financial recommendations. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to create tailored self-employed retirement plans. We offer all our San Jose, CA clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
