Self-employed retirement plans Rochester, NY. The flexibility of running your own company in Rochester, NY offers many benefits of working for yourself. Even so, this flexibility often comes with certain challenges, particularly when it comes to building your retirement fund, because you don't have the benefit of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from understanding their retirement options. In addition to enjoying a more secure retirement, seeking advice from a financial advisor in Rochester, NY to set up your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Rochester, NY financial advisory and retirement planning firms truly grasp the challenges faced by small business owners quite like Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and we have a rich history of helping businesses with their retirement planning needs. We know that your business and retirement aspirations go far beyond just monetary concerns, and we strive to provide personalized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Rochester, NY, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a self-employed financial advisor in Rochester, NY today.
Why Rochester, NY Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide tangible benefits today. From flexible contributions to significant tax savings, partnering with a financial advisor in Rochester, NY enables you to create your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) offers the option to modify how much you save:
- Customizable Contributions: Set aside more during high-income years and reduce savings when revenues are down, so your plan fits your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw without tax penalties in the future—a wise move if you expect your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA 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, which gives your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you could qualify for state-specific deductions as a sole proprietor. These state-level 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 put into a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future isn’t only about how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across a mix of asset classes like stocks and bonds can help mitigate financial risk while helping to grow your savings.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund helps you avoid tapping into your nest egg during tough times and incurring penalties.
Plan for the Future of Your Rochester, NY Business
Preparing for retirement also helps you plan ahead for what’s next with your Rochester, NY business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and won’t be included in the sale. These plans ensure the steady income you’ll need during retirement. Remember 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 up to $70,000 for Solo 401(k)s, factoring in catch-up contributions, depending on plan details).
- 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 savings offer the funds you need as you make this shift. You can also work with a financial advisor with expertise in succession and retirement planning to minimize tax burdens on the sale.
With the best-fit retirement strategy, you gain control over your financial future, reduce your tax burden, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Rochester, NY Now?
There’s no denying that time is one of the most important resources for building your retirement fund. Getting a head start not only lets you accumulate a bigger financial cushion but also reduces the financial burden of playing catch-up as you get older. The following are reasons why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement may cause a major impact on the savings you’ll have when you reach retirement age. The biggest reason is compound interest—the powerful process where your investments earn returns, and those returns, subsequently, generate even more returns. The more time your money has to grow, the more significant the effect of this growth.
Example: Alex and Taylor are both self-employed professionals. Both of them want to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but contributes $7,500 annually to make up for lost time.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and accumulates $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time can lead to substantial growth. Here’s a simple scenario showing the impact of compound interest:
- Starting at age 25: By investing $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: Contributing 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.
Saving early, the less effort required each year to meet your retirement goals.
*The figures provided in this example are based on 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 intended as illustrative examples and do not guarantee future performance. Your individual results may differ due to elements like market conditions, fees, and individual circumstances. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Rochester, NY, it can be tempting to prioritize reinvesting in your business over saving for retirement. That said, beginning a plan now enables you to:
- Leverage tax-free future growth or withdrawals without taxes down the road.
- Take advantage of adjustable savings that align with your earnings.
- Create a safety net that provides security, no matter how your business changes.
Getting started now, the less you’ll have to worry about making up for lost time later in life. Building your retirement savings today means managing your financial future and creating for yourself the opportunity to focus on your dreams—both for your future retirement and your Rochester, NY business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for self-employed individuals in Rochester, NY, each with its own advantages and considerations. A financial advisor can help you evaluate the advantages and disadvantages of each choice and choose the one best suited for your unique situation. Generally speaking, your self-employed retirement plan options in Rochester, NY are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that offer specific tax advantages. In a conventional IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but money taken out during retirement are subject to income tax. In contrast, Roth IRAs require contributions from post-tax earnings, but retirement withdrawals that qualify, including earnings, are not taxed. In both cases, withdrawals come without penalties if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, IRAs, including traditional and Roth options are accessible for individuals with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA serves as a retirement savings option that permits self-employed individuals to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role above the 25% you (the employer) have designated. If you have employees, it's required to 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. SEP IRAs works well for companies with periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs work like standard IRAs, where the contributions are tax-deferred and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 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: The Solo 401(k), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan intended for companies that have no employees or if the only employee is your spouse. Solo 401(k)s operate much like employer-sponsored 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the extra savings options can be balanced by more restricted investment choices. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, subject to the annual contribution limit. In 2025, those limits are $23,500, or $31,000 if you're over 50, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) must not surpass 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 for individuals aged 50+ (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that guarantees a set amount to business owners upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but enables participants to determine what they'll have in retirement. This strategy is recommended for higher-income entrepreneurs who are focused on saving a significant sum for retirement and can commit to making larger deposits. Contributions are tax deferred, and withdrawals are taxable as income upon retirement.
Eligibility: Any self-employed individual running an owner-only business or with a small staff of under five can open an individual defined benefit plan, but it's generally advised for individuals aged 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 if over age 50)
- Organizations that already put in 3-4% and are willing to do more
- Companies that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The contribution limit requires calculation from an actuary based on your financial situation, age, and savings targets. Limits on contributions change annually.
The Importance of a Financial Advisor in Rochester, NY for Your Self-Employed Retirement Plan
Partnering with an advisor in Rochester, NY specialized in self-employed retirement plans can be an invaluable resource for those working for themselves. They offer the knowledge to assist guide you through the challenges of retirement planning and craft a tailored strategy that matches your objectives. An expert in your area will evaluate your financial situation, determine how much risk you’re comfortable with, and help you in selecting the best options about saving and investing for retirement. A key part of what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Further adapt the plan to fit you personally even further
- Create a written plan that complies with IRS regulations
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Offer continued financial education and guidance to help you navigate your retirement journey
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Rochester, NY: Correct Capital's Process
Self-employed individuals in Rochester, NY who aren’t equipped with the time or understanding to handle their self-employed retirement plan themselves can become overwhelmed as they look at their available plans. With Correct Capital, our Rochester, NY financial advisors take on the majority of your retirement planning for you, to help make meeting your retirement goals as straightforward as possible for you. We will guide you in creating 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 brief introduction lets us get a sense of your goals with no obligation or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including whether you have employees, your present financial standing, and your future objectives. This helps us create a personalized strategy that aligns with your goals.
- Review Your Plan: Once we've developed a plan based on the information you provide, we'll sit down with you and go over your plan thoroughly to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll set everything up so you can start saving. As time goes on, we'll check in and monitor your plan to make sure it remains aligned with your goals.
Our Rochester, NY financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in Rochester, NY include:
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
Call Correct Capital for Your Self-Employed Retirement Plan in Rochester, NY
Your business isn't "just a business" to you, and your Rochester, NY financial advisors need to offer more than simply sound financial advice. At Correct Capital, we make it a priority to understand our clients and their businesses to provide customized self-employed retirement plans. All our clients in Rochester, NY benefit from our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To begin on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
