Self-employed retirement plans Aurora, IL. The flexibility of being your own boss in Aurora, IL is one of the best aspects of being self-employed. Even so, this freedom often comes with potential drawbacks, notably when it comes to building your retirement fund, because you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many should consider understanding their retirement options. In addition to having a financially stable retirement, partnering with a financial advisor in Aurora, IL to set up your self-employed retirement plan delivers significant tax advantages that enable your business to grow and succeed.
Few Aurora, IL investment consulting and retirement planning firms truly grasp the challenges faced by small business owners 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 assisting business owners in their retirement planning needs. We recognize that your professional and personal aspirations aren’t limited to just monetary concerns, and we work tirelessly to offer personalized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Aurora, IL, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Aurora, IL today.
Why Aurora, IL Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also provide tangible benefits today. From flexible contributions to substantial tax savings, consulting a financial advisor in Aurora, IL allows you to design your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
When your earnings vary annually, a plan like a SEP IRA or Solo 401(k) provides the freedom to tailor how much you save:
- Customizable Contributions: Save extra during high-income years and reduce savings when your earnings dip, so your plan works with your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw your savings tax-free down the road—a smart decision if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Self-employed retirement plans deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to compound.
- State-Specific Incentives: Based on your location, you could qualify for additional tax breaks as a sole proprietor. These state-level incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can apply for 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 different asset classes like stocks and bonds serves to mitigate financial risk while still growing your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net ensures you don’t using your retirement funds during financial hardships and facing tax penalties.
Plan for the Future of Your Aurora, IL Business
A thoughtful retirement strategy can assist you think through what’s next with your Aurora, IL business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s remain yours and don’t transfer with the business. These savings can provide the steady income you’ll need in the future. Remember that while the sale of a business usually creates a capital gain, retirement plan contributions are restricted by contribution limits (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, factoring in catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you are required to pay 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 may also seek advice from a financial advisor experienced in both succession and retirement strategies to reduce taxes associated with the transaction.
With the best-fit retirement strategy, you can take control of your financial future, lower your tax bill, and create a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Aurora, IL Now?
There’s no denying that time is one of the most important factors in retirement planning. Getting a head start not only lets you accumulate a more substantial retirement fund but also minimizes the stress of playing catch-up as you get older. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings can have a substantial impact on the savings you’ll have when you stop working. The primary reason is compound interest—the financial principle where your investments generate earnings, and those returns, then, generate even more returns. The longer your money has to grow, the larger the benefit of this growth.
Example: Taylor and Alex 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 waits until age 40 but saves $7,500 annually to catch up.
By age 65, with an assumption of 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 invested steadily can lead to significant growth. Here’s a simple scenario showing the effect of compound interest:
- 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: Saving the same $200 per month would result in only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*The numbers shown in this scenario represent estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are for illustrative purposes only and do not guarantee future performance. Actual results may vary depending on factors such as market conditions, fees, and your unique situation. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Aurora, IL, it is often the case that you prioritize reinvesting in your business rather than saving for retirement. That said, initiating a plan now gives you the chance to:
- Leverage tax-free future growth or withdrawals without taxes later on.
- Enjoy adjustable savings that adapt to your income.
- Build a financial cushion that provides security, no matter how your business evolves.
Starting early, the less you’ll need to worry about making up for lost time later in life. Taking steps toward your retirement goals today means gaining control over your financial future and creating for yourself the opportunity to turn your attention to your objectives—both for your golden years and your Aurora, IL business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for entrepreneurs in Aurora, IL, each providing its own advantages and considerations. A financial advisor can help you evaluate the advantages and disadvantages of each option and choose the one ideal for your circumstances. In most cases, your self-employed retirement plan options in Aurora, IL are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that offer specific tax advantages. In a conventional IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but retirement distributions are subject to income tax. In contrast, Roth IRA contributions from post-tax earnings, but eligible distributions during retirement, including earnings, are not taxed. In both types of accounts, withdrawals come without penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are accessible for individuals with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA serves as a retirement savings option that allows those who are self-employed 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 above 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. SEP IRAs works well for entrepreneurs facing periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs function like traditional IRAs, where you contribute pre-tax dollars and money withdrawn is subject to income tax.
Eligibility: Both employers and self-employed individuals 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
For self-employed individuals, the amount eligible to be contributed 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 savings option for the self-employed intended for businesses without employees or if the only employee is your spouse. Solo 401(k)s function similarly to traditional employer-managed 401(k) plans, and let you make contributions 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 limited investment options. 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: Solo 401(k)s are available solely to 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 are allowed to make two types of contributions:
- Deferrals as an employee 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 if you're over 50, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your net self-employment income, which is your net profit minus half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 for those aged 50 and older (for 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 delivers a pre-established payout to entrepreneurs upon retirement. Unlike defined contribution plans mentioned above, investment returns don’t affect the payout, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is ideal for wealthier entrepreneurs who are focused on saving a substantial amount for retirement and are willing to make sizeable contributions. Contributions are tax deferred, and withdrawals incur taxes as income in retirement.
Eligibility: Self-employed professionals running an owner-only business or employing fewer than five people may establish an individual defined benefit plan, but it's typically suggested for people above age 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)
- 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 contribution limit is calculated by an actuary determined by your income, age, and retirement goals. Allowable contributions change annually.
The Importance of a Financial Advisor in Aurora, IL for Your Self-Employed Retirement Plan
A financial advisor in Aurora, IL specialized in self-employed retirement plans serves as an invaluable resource for entrepreneurs. They bring the skills needed to navigate the complexities of retirement planning and craft a tailored strategy that reflects your aspirations. A financial advisor in Aurora, IL will assess where you stand financially, understand your risk tolerance, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you includes:
- Help you choose a plan that suits your unique requirements
- Further adapt the plan to your needs even further
- Adopt a written plan in accordance with IRS guidelines
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Track and fine-tune your plan when necessary
- Offer continued financial education and guidance throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Aurora, IL: Correct Capital's Process
Self-employed individuals in Aurora, IL who aren’t equipped with the time or understanding to oversee their own retirement planning on their own may end up overwhelmed as they look at their available plans. With Correct Capital, our Aurora, IL financial advisors take on the majority of your retirement strategy for you, and strive to ensure 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: 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 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 ask for information, including how many employees you have (if any), your present financial standing, and your retirement goals. This helps us create a tailored approach designed just for you.
- Review Your Plan: When we finalize a plan using the information you provide, we'll sit down with you and discuss your plan in detail to help you fully grasp it and understand how it best correlates to your needs.
- Implementation and Monitoring: When we finalize on your plan, we'll implement the necessary steps so you can begin contributing. Over the course of our partnership, we'll have regular meetings and monitor your plan to make sure it remains aligned with your goals.
Our Aurora, IL financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Aurora, IL include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Aurora, IL
Your business isn't "just a business" to you, and your Aurora, IL financial advisors should provide more than simply sound financial advice. With Correct Capital, we focus on building a relationship with our clients and their businesses to create personalized self-employed retirement plans. All our clients in Aurora, IL benefit from our I.O.U. promise: all guidance we provide 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.
