Self-employed retirement plans Bakersfield, CA. The flexibility of owning your own business in Bakersfield, CA is one of the greatest advantages of having a self-directed career. Even so, this freedom sometimes brings with potential drawbacks, particularly regarding building your retirement fund, because you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider understanding their retirement options. In addition to having a more secure retirement, seeking advice from a financial advisor in Bakersfield, CA to set up your self-employed retirement plan offers significant tax advantages that enable both you and your business to thrive.
Few Bakersfield, CA investment consulting and retirement planning firms truly grasp the challenges faced by self-employed individuals quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (read more of our story here), and we have a rich history of assisting business owners in their retirement planning needs. We know that your goals for your business and retirement extend well past just monetary concerns, and we work tirelessly to create personalized solutions to meet your unique goals. Keep reading to learn more about your self-employed retirement plan options in Bakersfield, CA, or call Correct Capital at 877-930-401k or contact us online to consult with a small business financial advisor in Bakersfield, CA today.
Why Bakersfield, 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 deliver real benefits today. Offering flexibility in contributions to significant tax savings, working with a financial advisor in Bakersfield, CA allows you to customize your retirement plan to align with your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the flexibility to modify how much you save:
- Customizable Contributions: Contribute more during profitable years and scale back when revenues are down, so that your plan aligns with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw without tax penalties in the future—a smart decision if you believe your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, allowing you to keep more of your earnings.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to accumulate.
- State-Specific Incentives: In some states, you may be eligible for additional credits as a business owner. These regional incentives make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can take advantage of a credit of up to 50% of the first $2,000 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement isn’t only about how much you save—it’s also about how you invest:
- Diversified Portfolios: Spreading your investments across a mix of stocks, bonds, and other assets serves to minimize exposure to risk while helping to grow your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund helps you avoid dipping into savings during tough times and incurring penalties.
Plan for the Future of Your Bakersfield, CA Business
Preparing for retirement also helps you prepare for what’s next with your Bakersfield, CA business:
- Selling Your Business: If you’re planning to sell, plans like SEP IRAs or Solo 401(k)s remain your personal assets and don’t transfer with the business. These savings offer the steady income you’ll need in the future. Remember that while the sale of a business usually creates a capital gain, contributions to retirement accounts are capped at annual limits (e.g., as much as $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Strategically planning your contributions helps lower the taxes you might face when you sell your business.
- Succession Planning: Whether you’re transferring ownership, your nest egg offer a stable foundation as you make this shift. You may also partner with a financial advisor who specializes in succession planning and retirement accounts to help with taxes associated with the transaction.
With the right retirement plan, you manage your financial future, reduce your tax burden, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Bakersfield, CA Now?
There’s no denying that time is one of the most important factors in retirement planning. Beginning sooner rather than later not only helps you grow a larger nest egg but also minimizes the financial burden of playing catch-up as you get older. Here’s why it makes sense to begin today:
The Cost of Waiting
Waiting to start your retirement fund could lead to a substantial impact on the amount you’ll have when you stop working. The main reason is compound interest—the financial principle where your investments generate earnings, and those returns, then, generate even more returns. The more time your money has to grow, the more significant the benefit of compounding.
Example: Taylor and Alex are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but contributes $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently often create impressive growth. Consider this example showing the effect of compound interest:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month leaves you with only $235,412.97* by age 65—a gap of over $260,000, simply due to a 10-year delay.
The earlier you begin, the lower your annual savings needs each year to meet your retirement goals.
*The numbers shown in this scenario are estimates generated with NerdWallet’s Compound Interest Calculator, assuming 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 are not a promise of future results. Your individual results may differ depending on factors such as market conditions, fees, and personal factors. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Bakersfield, CA, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. That said, starting a plan now allows you to:
- Leverage tax-deferred growth or withdrawals without taxes later on.
- Take advantage of adjustable savings that change with your cash flow.
- Create a financial cushion that ensures stability, no matter how your business develops.
Starting early, the less you’ll have to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and allowing yourself the ability to turn your attention to your dreams—both for your future retirement and your Bakersfield, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for those working for themselves in Bakersfield, CA, each offering its own pros and cons. A financial advisor is available to help you evaluate the pros and cons of each option and identify the one best suited for your unique situation. In most cases, your self-employed retirement plan options in Bakersfield, CA include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that include key tax perks. In a conventional IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but retirement distributions are taxed as income. In contrast, Roth IRAs require contributions from post-tax earnings, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are open to those with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA serves as a retirement savings option that permits entrepreneurs to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, you are obligated 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. A SEP IRA is a good option for entrepreneurs facing periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs lack expensive setup or ongoing fees.
SEPs function like traditional IRAs, where you contribute pre-tax dollars and money withdrawn is subject to income tax.
Eligibility: Any employer, including the self-employed 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
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for companies that have no employees or when the sole employee is your spouse. This type of plan are similar to employer-sponsored 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the increased savings potential may be offset by more restricted investment choices. With this type of plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to 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 earned income from self-employment, 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) are limited to 25% of your net earnings from self-employment, which is your net profit minus half of your self-employment tax and the employee contributions you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan offers a structured retirement solution that provides a fixed, predetermined benefit to self-employed individuals upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but enables participants to determine exactly how much they'll have in retirement. This plan is recommended for higher-income entrepreneurs who aim to accumulate a significant sum for retirement and can commit to making substantial contributions. Contributions are tax deferred, and withdrawals are taxed as income during retirement.
Eligibility: Self-employed professionals running an owner-only business or with a small staff of under five are eligible to open an individual defined benefit plan, but it's typically recommended for people above age 50 who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Business owners or partners who aim to deposit more than $70,000 (or $77,500 for individuals 50 and older)
- Companies already contributing 3-4% with plans to contribute more
- Companies with proven consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The cap on contributions must be determined by an actuary determined by your income, age, and retirement goals. Limits on contributions are updated yearly.
The Importance of a Financial Advisor in Bakersfield, CA for Your Self-Employed Retirement Plan
A financial advisor in Bakersfield, CA experienced with retirement plans for the self-employed is an invaluable resource for those working for themselves. They bring the skills needed to navigate the complexities of retirement planning and design a personalized approach that aligns with your goals. An expert in your area will evaluate your financial situation, identify your risk preferences, and assist you in choosing wisely about saving and investing for retirement. Part of what we do for you involves:
- Guide you in choosing a plan that suits your unique requirements
- Customize the plan to fit you personally even further
- Adopt a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Help you understand the plan's terms
- Monitor and adjust your plan when necessary
- Provide ongoing education and advice as you continue on the road to retirement
- Maximize what you receive in retirement by maximizing your social security benefits
Self-Employed Retirement Plans in Bakersfield, CA: Correct Capital's Process
Entrepreneurs in Bakersfield, CA who don’t have the time or expertise to oversee their retirement savings strategy independently may end up overwhelmed as they look at their available plans. With Correct Capital, our Bakersfield, CA financial advisors take on the bulk of your savings plan setup for you, working to make meeting your future savings targets as hassle-free 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 suited to your needs for you and your business. This initial call helps us understand what you're looking for with no obligation or extensive time commitment on your part.
- Gather Information: Should we agree to proceed, we'll gather information, including whether you have employees, your present financial standing, and your long-term savings targets. This allows us to put together a custom plan that aligns with your goals.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll meet with you and discuss your plan step by step to make sure it's clear and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll put everything in place so you can start saving. Over the course of our partnership, we'll have regular meetings and track your progress to keep it tailored to your evolving circumstances.
Our Bakersfield, CA financial advisors and retirement plan consultants act as fiduciary advisors, which means they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Bakersfield, CA include:
- Roth Conversion
- Investment Management
- 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 Bakersfield, CA
You don't see your business as "just a business", and your Bakersfield, CA financial advisors need to offer more than basic financial recommendations. Correct Capital takes pride in, we focus on building a relationship with our clients and their businesses to create tailored self-employed retirement plans. All our clients in Bakersfield, CA benefit from 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.
