Self-employed retirement plans McKinney, TX. The independence of running your own company in McKinney, TX is one of the greatest advantages of being self-employed. However, this freedom often comes with potential drawbacks, particularly when it comes to planning for retirement, 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 should consider understanding their retirement options. In addition to achieving a financially stable retirement, working with a financial advisor in McKinney, TX to set up your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few McKinney, TX investment consulting and retirement planning firms truly grasp the challenges faced by entrepreneurs quite like Correct Capital. The father of our founder was a small business owner himself (check out our story here), and our firm are deeply experienced in helping businesses with their retirement planning needs. We know that your business and retirement aspirations aren’t limited to simple financial figures, and we are dedicated to provide customized solutions aligned with your vision. Read on to discover about your self-employed retirement plan options in McKinney, TX, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in McKinney, TX today.
Why McKinney, TX 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 substantial tax savings, consulting a financial advisor in McKinney, TX allows you to design your retirement plan to suit 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) gives you the flexibility to modify how much you save:
- Customizable Contributions: Contribute more during profitable years and scale back when income is lower, ensuring your plan fits your current income.
- Roth Options: Choosing a Roth Solo 401(k) lets you settle taxes at the time of contribution, allowing you to withdraw your savings tax-free down the road—an advantageous choice if you anticipate your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, helping you keep more of your income.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, which gives your money more time to compound.
- State-Specific Incentives: Depending on where you live, you might access extra tax breaks as a sole proprietor. These local incentives make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement isn’t only about how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across a mix of asset classes like stocks and bonds is a smart way to minimize exposure to risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t using your retirement funds during financial hardships and incurring penalties.
Plan for the Future of Your McKinney, TX Business
Retirement planning also helps you prepare for what’s next with your McKinney, TX business:
- Selling Your Business: For those considering a sale, plans like SEP IRAs or Solo 401(k)s remain your personal assets and don’t transfer with the business. These accounts offer the reliable income you’ll need during retirement. It’s important to note that while selling a business often leads to a capital gain, retirement plan contributions are subject to yearly maximums (e.g., up to $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely helps lower the taxes you might face when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts offer financial security during the change. You can also seek advice from a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens associated with the transaction.
With the best-fit retirement strategy, you can take control of your financial future, cut down your tax obligations, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in McKinney, TX Now?
Time is one of the most valuable resources in retirement planning. Starting early not only helps you grow a more substantial retirement fund but also lowers the financial burden of saving aggressively in the future. Here’s why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings can have a major impact on the total you’ll have when you reach retirement age. The main reason is compound interest—the concept where your investments generate earnings, and those returns, subsequently, accumulate even more returns. The more time your money has to grow, the greater the benefit of this compounding process.
Example: Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but contributes $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Small, consistent savings invested steadily can lead to significant growth. Take a look at this scenario showing the power of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an average annual return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, all because of a 10-year delay.
Saving early, the less you need to save each year to achieve your retirement goals.
*These calculations are based on estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. These examples are for illustrative purposes only and do not guarantee future performance. Outcomes may change due to variables including market conditions, fees, and personal factors. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in McKinney, TX, it can be tempting to put more emphasis on reinvesting in your business rather than saving for retirement. However, initiating a plan now gives you the chance to:
- Take advantage of growth that is tax-deferred or penalty-free withdrawals later on.
- Benefit from contribution flexibility that align with your cash flow.
- Build a long-term safety measure that offers peace of mind, no matter how your business develops.
Getting started now, the less you’ll be required to worry about making up for lost time later in life. Saving for retirement now means gaining control over your financial future and creating for yourself the opportunity to focus on your objectives—both for your golden years and your McKinney, TX business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for self-employed individuals in McKinney, TX, each with its own advantages and considerations. A financial advisor will guide you to understand the pros and cons of each choice and identify the one best suited for your needs. Generally speaking, your self-employed retirement plan options in McKinney, TX consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that include specific tax advantages. In a traditional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but retirement distributions are taxed as income. In contrast, Roth IRAs require contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are exempt from taxes. 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 an earned 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: SEP IRAs is a retirement plan that enables entrepreneurs to contribute a percentage of their net earnings. Contributions must come from an employer, so, as a independent business owner, you (the employee) would not be able to contribute above the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan is a good option for businesses that experience periods of inconsistent earnings. Compared to other retirement options, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs operate like conventional IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
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
As a self-employed person, the amount eligible to be contributed 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 savings option for the self-employed meant for companies that have no employees or where the only employee is a spouse. This type of plan are similar to traditional employer-managed 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This allows for more savings versus 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 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. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 25% of your net earnings from self-employment, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (as of 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that provides a pre-established payout to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but enables participants to determine the precise amount they'll get in retirement. This plan is recommended for higher-income entrepreneurs who are focused on saving a large amount for retirement and are willing to make substantial contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs managing a one-person company or with a small staff of under five are eligible to open an individual defined benefit plan, but it's typically suggested for those over 50 who make $250,000 or more annually. In most cases, good candidates for defined benefit plans tend to be:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 for individuals 50 and older)
- Businesses currently investing 3-4% with plans to contribute more
- Organizations with proven consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The contribution limit requires calculation from an actuary using your financial situation, age, and savings targets. Limits on contributions change annually.
The Importance of a Financial Advisor in McKinney, TX for Your Self-Employed Retirement Plan
Working with a financial advisor in McKinney, TX experienced with retirement plans for the self-employed serves as an essential partner for those working for themselves. They have the expertise to help navigate the complexities of retirement planning and develop a customized plan that aligns with your goals. A financial advisor in McKinney, TX will evaluate your financial situation, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. Included in what we do for you includes:
- Assist in selecting a plan that suits your unique requirements
- Tailor the plan to your needs even further
- Create a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Review and modify your plan when necessary
- Provide ongoing education and advice as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in McKinney, TX: Correct Capital's Process
Self-employed individuals in McKinney, TX who don’t have the time or expertise to handle their retirement savings strategy themselves can become overwhelmed by their available plans. At Correct Capital, our McKinney, TX financial advisors handle the majority of your savings plan setup for you, to help make meeting your future savings targets as straightforward as possible for you. We can help you get set up 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 our services align for you and your business. This brief introduction allows us to get a sense of your goals with zero commitment or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll request information, including how many employees you have (if any), your current financial situation, and your long-term savings targets. This allows us to put together a custom plan designed just for you.
- Review Your Plan: After we put together a plan from the information you provide, we'll schedule a meeting and go over your plan in detail to help you fully grasp 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 start saving. As time goes on, we'll meet with you and review your strategy to keep it tailored to your evolving circumstances.
Our McKinney, TX financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in McKinney, TX 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 McKinney, TX
Your business isn't "just a business" to you, and your McKinney, TX financial advisors should provide 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 McKinney, TX benefit from our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To get started on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
