Self-employed retirement plans Providence, RI. The flexibility of owning your own business in Providence, RI is one of the greatest advantages of having a self-directed career. That said, this flexibility can come with potential drawbacks, notably in terms of planning for retirement, since you don't have the benefit of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from looking into other possibilities. In addition to enjoying a financially stable retirement, seeking advice from a financial advisor in Providence, RI to create your self-employed retirement plan can provide significant tax advantages that allow both you and your business to thrive.
Few Providence, RI investment consulting and retirement planning firms truly grasp the challenges faced by self-employed individuals better than Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (learn more about our story here), and our firm are deeply experienced in supporting entrepreneurs with their retirement planning needs. We know that your business and retirement aspirations aren’t limited to simple financial figures, and we work tirelessly to offer personalized solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Providence, RI, or call Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Providence, RI today.
Why Providence, RI Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also deliver tangible benefits today. Offering flexibility in contributions to substantial tax savings, partnering with a financial advisor in Providence, RI enables you to customize your retirement plan to align with your individual circumstances.
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 freedom to tailor how much you save:
- Customizable Contributions: Contribute more during successful years and scale back when your earnings dip, so your plan aligns with your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw your savings tax-free down the road—an advantageous choice if you expect your tax rate to be higher in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to grow.
- State-Specific Incentives: In some states, you could qualify for state-specific tax breaks as a business owner. These local incentives help 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, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement goes beyond just how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Distributing your investments across varied stocks, bonds, and alternatives is a smart way to mitigate financial risk while helping to grow your retirement fund.
- Emergency Back-Up: Pairing your retirement plan with a financial buffer for your business ensures you don’t using your retirement funds during financial hardships and facing tax penalties.
Plan for the Future of Your Providence, RI Business
A thoughtful retirement strategy enables you to think through what’s next with your Providence, RI business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and won’t be included in the sale. These accounts offer the financial stability you’ll need during retirement. Remember that while the sale of a business usually creates a capital gain, deposits into these plans are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you are required to pay when you sell your business.
- Succession Planning: For those winding down or handing over their business, your nest egg ensure a stable foundation during the change. You might want to partner with a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens associated with the transaction.
With the right retirement plan, 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 Providence, RI Now?
Time is one of the most important resources for building your retirement fund. Getting a head start not only helps you grow a larger nest egg but also reduces the stress of saving aggressively in the future. The following are reasons why it pays to take action now:
The Cost of Waiting
Delaying your retirement savings may cause a major impact on the savings you’ll have when you reach retirement age. The biggest reason is compound interest—the concept where your investments grow, and those returns, subsequently, accumulate even more returns. The greater time span your money has to grow, the larger the effect of this growth.
Example: Two individuals, Alex and Taylor are both entrepreneurs. 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 saves $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex invests $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time often create impressive growth. Here’s a simple scenario showing the power of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an projected return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month yields 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 less you need to save each year to achieve your retirement goals.
*The figures provided in this example are estimates derived from NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. This information is meant to provide general guidance and are not a promise of future results. Actual results may vary based on factors such as market conditions, fees, and individual circumstances. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Providence, RI, it might seem easier to focus more on reinvesting in your business rather than saving for retirement. That said, starting a plan now enables you to:
- Take advantage of tax-free future growth or tax-free withdrawals down the road.
- Benefit from adjustable savings that align with your income.
- Build a safety net that provides security, no matter how your business changes.
Starting early, the less you’ll have to worry about making up for lost time later in life. Taking steps toward your retirement goals today means taking control of your financial future and allowing yourself the freedom to turn your attention to your dreams—both for your retirement years and your Providence, RI business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for entrepreneurs in Providence, RI, each offering its own advantages and considerations. A financial advisor is available to help you learn about the benefits and drawbacks of each choice and choose the one ideal for your circumstances. Generally speaking, your self-employed retirement plan options in Providence, RI are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that provide key tax perks. In a standard IRA, the money you contribute is often tax-deductible, and investment earnings grow tax-deferred, but money taken out during retirement are taxable. In contrast, with Roth IRAs, you contribute are made with after-tax income, but qualified withdrawals in retirement, including earnings, are not taxed. In both accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, traditional and Roth IRAs are available to anyone with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that enables entrepreneurs to contribute a percentage of their net earnings. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions more than the 25% you (the employer) already contributed. 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 is a good option for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs operate like standard IRAs, where you contribute pre-tax dollars and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can establish 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 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 retirement savings plan designed for companies that have no employees or where the only employee is a spouse. Solo 401(k)s are similar to standard 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the additional opportunities can be balanced by more restricted investment choices. 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: This plan is exclusively for business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you have the ability to 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 are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your adjusted self-employment income, 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 for individuals aged 50+ (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans represents a type of retirement plan that provides a fixed, predetermined benefit to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but lets individuals clearly understand exactly how much they'll get in retirement. This strategy is ideal for high-earning self-employed individuals who want to save a significant sum for retirement and are willing to make substantial contributions. Contributions offer tax-deferred growth, and withdrawals are taxable as income in retirement.
Eligibility: Entrepreneurs running an owner-only business or employing fewer than five people can open an individual defined benefit plan, but it's most commonly suggested for individuals aged 50+ who make $250,000 or more annually. In most cases, good candidates for defined benefit plans tend to be:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Businesses with proven consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution must be determined by an actuary using your financial situation, age, and savings targets. Contribution limits change annually.
The Importance of a Financial Advisor in Providence, RI for Your Self-Employed Retirement Plan
A financial advisor in Providence, RI specialized in self-employed retirement plans serves as an important asset for self-employed individuals. They offer the knowledge to assist understand the intricacies of saving for retirement and design a personalized approach that reflects your aspirations. A financial advisor in Providence, RI will review your finances, determine how much risk you’re comfortable with, and help you in making informed decisions about saving and investing for retirement. Included in what we do for you involves:
- Help you choose a plan that aligns with your objectives and circumstances
- Further adapt the plan to your specific situation even further
- Adopt a written plan as required by IRS rules
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Deliver continuous support and financial insights throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Providence, RI: Correct Capital's Process
Entrepreneurs in Providence, RI who lack the time, interest, or knowledge to handle their retirement savings strategy themselves can become overwhelmed when faced with their choices. At Correct Capital, our Providence, RI financial advisors handle the majority of your savings plan setup for you, and strive to ensure meeting your future savings targets as straightforward 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 can help understand if our services align for you and your business. This short conversation allows us to get a sense of your goals with no pressure or major time investment on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including your employee count, your present financial standing, and your retirement goals. This allows us to put together a custom plan suited specifically for your needs.
- Review Your Plan: When we finalize a plan based on the information you provide, we'll meet with you and review your plan in detail to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: When we finalize on your plan, we'll implement the necessary steps so you can initiate your savings journey. Throughout our relationship, we'll check in and review your strategy to keep it tailored to your evolving circumstances.
Our Providence, RI financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Providence, RI include:
- 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 Providence, RI
To you, your business is more than "just a business", and your Providence, RI financial advisors must deliver more than basic financial recommendations. At Correct Capital, we make it a priority to understand our clients and their businesses to deliver personalized self-employed retirement plans. To every client in Providence, RI, we provide 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, contact Correct Capital now at 877-930-401k or contact us online.
