Self-employed retirement plans Pasadena, TX. The flexibility of owning your own business in Pasadena, TX offers many benefits of working for yourself. That said, this independence sometimes brings with a lack of security, notably regarding planning for retirement, since you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from looking into other possibilities. In addition to achieving a more comfortable retirement, seeking advice from a financial advisor in Pasadena, TX to set up your self-employed retirement plan offers significant tax advantages that enable your business to grow and succeed.
Few Pasadena, TX wealth management and retirement planning firms understand the needs of entrepreneurs quite like Correct Capital. The father of our founder was a small business owner himself (check out our story here), and we have a rich history of helping businesses with their retirement planning needs. We know that your goals for your business and retirement go far beyond just monetary concerns, and we work tirelessly to create personalized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Pasadena, TX, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a entrepreneurial financial advisor in Pasadena, TX today.
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Why Pasadena, TX Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also offer real benefits today. From flexible contributions to considerable tax savings, working with a financial advisor in Pasadena, TX helps you design your retirement plan to fit 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 option to modify how much you save:
- Customizable Contributions: Save extra during successful years and reduce savings when revenues are down, so your plan fits your financial situation.
- Roth Options: A Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw tax-free later—a wise move if you believe your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, so you can keep more of your income.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to grow.
- State-Specific Incentives: In some states, you might access extra deductions as a sole proprietor. These regional incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants 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 determined by your investment strategy:
- Diversified Portfolios: Spreading your investments across different stocks, bonds, and other assets can help minimize exposure to risk while still growing your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net prevents you from tapping into your nest egg during financial hardships and incurring penalties.
Plan for the Future of Your Pasadena, TX Business
Retirement planning can assist you plan ahead for what’s next with your Pasadena, TX business:
- Selling Your Business: If you’re planning to sell, plans like SEP IRAs or Solo 401(k)s remain yours and won’t be included in the sale. These plans 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 capped at annual limits (e.g., as much as $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: Strategically planning your contributions helps lower the taxes you are required to pay when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts ensure financial security as you make this shift. You might want to work with a financial advisor with expertise in succession and retirement planning to minimize tax burdens on the sale.
With the right retirement plan, you manage your financial future, reduce your tax burden, and create a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Pasadena, TX Now?
There’s no denying that time is one of the most important resources in retirement planning. Getting a head start not only lets you accumulate a bigger financial cushion but also minimizes the pressure 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 could lead to a substantial impact on the amount you’ll have when you stop working. The primary reason is compound interest—the powerful process where your investments grow, and those returns, then, accumulate even more returns. The longer your money has to grow, the larger the effect of compounding.
Example: Two individuals, Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but contributes $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex contributes $180,000 and accumulates $691,184.39*.
- Taylor contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments made consistently may result in impressive growth. Here’s a simple scenario showing the power 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: Contributing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, all because of a 10-year delay.
The earlier you begin, the less effort required each year to meet your retirement goals.
*The numbers shown in this scenario represent estimates derived from 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 are not a promise of future results. Your individual results may differ based on variables including market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
For self-employed individuals in Pasadena, TX, it might seem easier to focus more on reinvesting in your business instead of saving for retirement. That said, initiating a plan now enables you to:
- Leverage tax-free future growth or tax-free withdrawals later on.
- Benefit from adjustable savings that change with your earnings.
- Build a safety net that ensures stability, no matter how your business develops.
The sooner you start, the less you’ll be required 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 creating for yourself the freedom to focus on your objectives—both for your future retirement and your Pasadena, TX business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options designed for entrepreneurs in Pasadena, TX, each with its own pros and cons. A financial advisor can help you learn about the benefits and drawbacks of each plan and identify the one best suited for your needs. Typically, your self-employed retirement plan options in Pasadena, TX include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that provide key tax perks. In a conventional IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but money taken out during retirement are taxed as income. In contrast, Roth IRAs require contributions from post-tax earnings, but retirement withdrawals that qualify, including earnings, are tax-free. In both types of accounts, withdrawals are penalty-free provided 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 open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that enables self-employed individuals to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) cannot make additional contributions beyond the 25% you (the employer) already contributed. 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 set monetary value or a percentage of wages to employee accounts. This type of plan is a good option for companies with periods of inconsistent earnings. Unlike other plans, SEP IRAs lack costly startup or administrative fees.
SEPs function like conventional 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 are capped at the lower of:
- 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, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses with no employees or if the only employee is your spouse. These plans are similar to employer-sponsored 401(k) plans, and enable contributions as both an employee or an employer with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. Using a solo 401(k), 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: As a self-employed individual with a solo 401(k) plan, you can make two types of contributions:
- Employee contributions of up to 100% of your self-employed earnings, capped at the annual contribution limit. For 2025, the limits will be $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 calculated as net profits less half of your self-employment tax and the deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 for individuals aged 50+ (as of 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan offers a structured retirement solution that provides a set amount to business owners upon retirement. In contrast to the plans discussed earlier, investment returns don’t affect the payout, but enables participants to determine the precise amount they'll receive in retirement. This option is best suited for higher-income entrepreneurs who want to save a substantial amount for retirement and are willing to make sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income in 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 most commonly suggested for those over 50 who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans include:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Companies with proven consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution requires calculation from an actuary based on your earnings, age, and retirement objectives. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Pasadena, TX for Your Self-Employed Retirement Plan
Partnering with an advisor in Pasadena, TX experienced with retirement plans for the self-employed can be an important asset for entrepreneurs. They offer the knowledge to assist understand the intricacies of saving for retirement and develop a tailored strategy that aligns with your goals. A financial advisor in Pasadena, TX will evaluate your financial situation, identify your risk preferences, and assist you in selecting the best options about saving and investing for retirement. Part of what we do for you features:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Further adapt the plan to your needs even further
- Adopt a written plan that complies with IRS regulations
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Offer continued financial education and guidance throughout your retirement planning process
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Pasadena, TX: Correct Capital's Process
Self-employed individuals in Pasadena, TX who don’t have the time or expertise to handle their own retirement planning independently often feel overwhelmed when faced with their available plans. At Correct Capital, our Pasadena, TX financial advisors handle the lion's share of your retirement strategy for you, to help make meeting your retirement goals as hassle-free as possible for you. We will guide you in creating your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can determine if we're a good fit for you and your business. This brief introduction helps us learn about your needs with no obligation or major time investment on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including how many employees you have (if any), your present financial standing, and your retirement goals. This enables us to craft a custom plan suited specifically for your needs.
- Review Your Plan: After we put together a plan based on the information you provide, we'll schedule a meeting and review your plan thoroughly to ensure you understand it and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can start saving. Over the course of our partnership, we'll check in and review your strategy to make sure it remains aligned with your goals.
Our Pasadena, TX financial advisors and retirement plan consultants are fiduciary advisors, meaning they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Pasadena, TX 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 Pasadena, TX
You don't see your business as "just a business", and your Pasadena, TX financial advisors must deliver more than simply sound financial advice. With Correct Capital, we focus on building a relationship with our clients and their businesses to provide customized self-employed retirement plans. To every client in Pasadena, TX, we provide our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To get started on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
