Self-employed retirement plans Detroit, MI. The flexibility of being your own boss in Detroit, MI is one of the greatest advantages of being self-employed. Even so, this flexibility can come with certain challenges, particularly regarding building your retirement fund, because you don't have the benefit of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from exploring their options. In addition to achieving a more comfortable retirement, seeking advice from a financial advisor in Detroit, MI to establish your self-employed retirement plan delivers significant tax advantages that enable you to move your business forward.
Few Detroit, MI investment consulting and retirement planning firms truly grasp the challenges faced by self-employed individuals quite like Correct Capital. The father of our founder was a small business owner himself (check out our story here), and we are deeply experienced in helping businesses with their retirement planning needs. We recognize that your business and retirement aspirations aren’t limited to just monetary concerns, and we work tirelessly to offer customized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Detroit, MI, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Detroit, MI today.
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Why Detroit, MI 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. From flexible contributions to substantial tax savings, working with a financial advisor in Detroit, MI allows you to design your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to tailor how much you save:
- Customizable Contributions: Contribute more during high-income years and scale back when your earnings dip, so your plan fits your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw without tax penalties in the future—an advantageous choice if you believe your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, allowing you to keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, providing your money more time to accumulate.
- State-Specific Incentives: Based on your location, you might access state-specific deductions as a self-employed individual. These regional incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, cutting down 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 about how you invest:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and other assets can help mitigate financial risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t dipping into savings during financial hardships and incurring penalties.
Plan for the Future of Your Detroit, MI Business
Retirement planning can assist you think through what’s next with your Detroit, MI business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and don’t transfer with the business. These savings can provide the financial stability you’ll need later on. It’s important to note that while the sale of a business usually creates a capital gain, retirement plan contributions are restricted by contribution limits (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you might face when you sell your business.
- Succession Planning: Whether you’re transferring ownership, your retirement savings ensure a stable foundation as you make this shift. You can also partner with a financial advisor who specializes in succession planning and retirement accounts to help with taxes during the sale.
With the best-fit retirement strategy, you can take control of 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 Detroit, MI Now?
Time is one of the most crucial assets when it comes to saving for retirement. Starting early not only helps you grow a larger nest egg but also reduces the stress of catching up later in life. Here’s why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement can have a significant impact on the savings you’ll have when you retire. The biggest reason is compound interest—the financial principle where your investments earn returns, and those returns, in turn, earn even more returns. The more time your money has to grow, the more significant the impact of compounding.
Example: Alex and Taylor are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor waits until age 40 but saves $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments invested steadily often create impressive growth. Take a look at this scenario showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the less you need to save each year to meet your retirement goals.
*The figures provided in this example represent estimates generated with NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. This information is intended as illustrative examples and do not guarantee future performance. Outcomes may change based on elements like market conditions, fees, and personal factors. Always consult a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Detroit, MI, it is often the case that you put more emphasis on reinvesting in your business instead of saving for retirement. Even so, starting a plan now enables you to:
- Benefit from tax-deferred growth or withdrawals without taxes later on.
- Take advantage of adjustable savings that align with your cash flow.
- Establish a financial cushion that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll be required 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 freedom to turn your attention to your objectives—both for your future retirement and your Detroit, MI business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options designed for self-employed individuals in Detroit, MI, each offering its own pros and cons. A financial advisor will guide you to understand the benefits and drawbacks of each choice and determine the one ideal for your circumstances. In most cases, your self-employed retirement plan options in Detroit, MI include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that include specific tax advantages. In a conventional IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but retirement distributions are subject to income tax. In contrast, Roth IRA contributions using income already taxed, but qualified withdrawals in retirement, including earnings, are not taxed. In both cases, withdrawals don’t incur penalties if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs 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: The Simplified Employee Pension IRA is a retirement plan that allows self-employed individuals to save a percentage of their net business profits. Contributions must come from an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role above the 25% you (the employer) allocate. If you have employees, you must contribute the same amount for them as you do for yourself. It's your choice whether to contribute a set monetary value or a percentage of wages to employee accounts. This type of plan may be ideal for entrepreneurs facing periods of inconsistent earnings. Compared to other retirement options, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs work like conventional 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 open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for businesses without employees or if the only employee is your spouse. Solo 401(k)s operate much like traditional employer-managed 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the extra savings options can be balanced by more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you can make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, up to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you're over 50, or $34,750 for individuals aged 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 employee contributions you made.
Your combined contributions must not surpass $70,000, or $77,500 for individuals aged 50+ (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that provides a fixed, predetermined benefit to business owners upon retirement. Unlike defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand what they'll have in retirement. This strategy is recommended for higher-income entrepreneurs who aim to accumulate a significant sum for retirement and are willing to make substantial contributions. Contributions are tax deferred, and withdrawals are taxable as income upon retirement.
Eligibility: Self-employed professionals operating a solo business or employing fewer than five people are eligible to open an individual defined benefit plan, but it's most commonly suggested for people above age 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans are:
- Business owners or partners who want to invest more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% with plans to contribute more
- Businesses that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The cap on contributions is calculated by an actuary using your earnings, age, and retirement objectives. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Detroit, MI for Your Self-Employed Retirement Plan
Working with a financial advisor in Detroit, MI focused on self-employed retirement strategies is an invaluable resource for self-employed individuals. They bring the skills needed to guide you through the challenges of retirement planning and develop a customized plan that reflects your aspirations. An expert in your area will evaluate your financial situation, identify your risk preferences, and guide you in choosing wisely about saving and investing for retirement. A key part of what we do for you includes:
- Guide you in choosing a plan that best fits your needs and goals
- Further adapt the plan to fit you personally even further
- Formalize a plan in writing as required by IRS rules
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Track and fine-tune your plan when necessary
- Provide ongoing education and advice to help you navigate your retirement journey
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in Detroit, MI: Correct Capital's Process
Entrepreneurs in Detroit, MI who don’t have the time or expertise to handle their self-employed retirement plan on their own may end up overwhelmed when faced with their available plans. At Correct Capital, our Detroit, MI financial advisors take on the bulk of your savings plan setup for you, and strive to ensure meeting your future savings targets as easy as possible for you. We can help you get set up your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team will assess if we're a good fit for you and your business. This initial call allows us to understand what you're looking for with no pressure or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including whether you have employees, your existing financial picture, and your retirement goals. This enables us to craft a custom plan that aligns with your goals.
- Review Your Plan: After we put together a plan from the information you provide, we'll schedule a meeting and review your plan in detail to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: Once we've agreed on your plan, we'll implement the necessary steps so you can initiate your savings journey. Throughout our relationship, we'll check in and monitor your plan to ensure it stays suited to your needs.
Our Detroit, MI financial advisors and retirement plan consultants act as fiduciary advisors, which means they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Detroit, MI include:
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
- Fiduciary Financial Advisor
Call Correct Capital for Your Self-Employed Retirement Plan in Detroit, MI
You don't see your business as "just a business", and your Detroit, MI financial advisors must deliver more than just good financial guidance. At Correct Capital, we take the time to get to know our clients and their businesses to provide customized self-employed retirement plans. All our clients in Detroit, MI benefit from our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To get started on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
