Self-employed retirement plans Austin, TX. The freedom of running your own company in Austin, TX offers many benefits of having a self-directed career. Even so, this independence often comes with potential drawbacks, especially regarding 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, although many would be better off looking into other possibilities. In addition to enjoying a more comfortable retirement, seeking advice from a financial advisor in Austin, TX to establish your self-employed retirement plan offers significant tax advantages that enable you to move your business forward.
Few Austin, TX financial advisory and retirement planning firms are as attuned to the requirements of 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 Correct Capital have a rich history of supporting entrepreneurs with their retirement planning needs. We understand that your goals for your business and retirement aren’t limited to just monetary concerns, and we are dedicated to offer customized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Austin, TX, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Austin, TX today.
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Why Austin, TX 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 considerable tax savings, consulting a financial advisor in Austin, TX allows you to customize your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to tailor how much you save:
- Customizable Contributions: Save extra during successful years and scale back when revenues are down, so that your plan aligns with your cash flow.
- 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 believe your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, so you can 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 may be eligible for extra credits as a sole proprietor. These regional 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 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of stocks, bonds, and alternatives is a smart way to mitigate financial risk while continuing to build your savings.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund helps you avoid dipping into savings during financial hardships and risking extra costs.
Plan for the Future of Your Austin, TX Business
Preparing for retirement enables you to plan ahead for what’s next with your Austin, TX business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and are not part of the sale. These accounts can provide the reliable income you’ll need later on. It’s important to note that while selling a business often leads to 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, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Using retirement contributions wisely helps lower the taxes you’ll owe when you pass on your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts ensure the funds you need through the transition. You might want to work with a financial advisor experienced in both succession and retirement strategies to reduce taxes during the sale.
With the best-fit retirement strategy, you gain control over 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 Austin, TX Now?
There’s no denying that time is one of the most important factors for building your retirement fund. Beginning sooner rather than later not only lets you accumulate a more substantial retirement fund but also minimizes the pressure of catching up later in life. Here’s why it pays to take action now:
The Cost of Waiting
Delaying your retirement savings could lead to a major impact on the total you’ll have when you retire. The biggest reason is compound interest—the concept where your investments generate earnings, and those returns, in turn, generate even more returns. The more time your money has to grow, the greater the benefit of compounding.
Example: Two individuals, Alex and Taylor are both self-employed professionals. Their shared goal is 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 puts away $7,500 annually to make up for lost time.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Regular, modest investments invested steadily can lead to significant growth. Consider this example showing the effect of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an average annual 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 shortfall of over $260,000, simply due to a 10-year delay.
The earlier you begin, the lower your annual savings needs each year to achieve your retirement goals.
*The figures provided in this example are based on 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. These examples are for illustrative purposes only and do not guarantee future performance. Your individual results may differ due to elements like market conditions, fees, and personal factors. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
If you’re self-employed in Austin, TX, it might seem easier to focus more on reinvesting in your business rather than saving for retirement. That said, beginning a plan now allows you to:
- Benefit from growth that is tax-deferred or tax-free withdrawals later on.
- Benefit from flexible contributions that align with your income.
- Establish a financial cushion that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll have to worry about catching up later in life. Taking steps toward your retirement goals today means gaining control over your financial future and creating for yourself the freedom to focus on your objectives—both for your future retirement and your Austin, TX business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options open for those working for themselves in Austin, TX, each providing its own pros and cons. A financial advisor is available to help you evaluate the advantages and disadvantages of each choice and identify the one ideal for your needs. Generally speaking, your self-employed retirement plan options in Austin, TX include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that offer distinct tax benefits. In a standard 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, with Roth IRAs, you contribute from post-tax earnings, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are available to anyone with a source of income.
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: The Simplified Employee Pension IRA is a retirement plan that permits those who are self-employed to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) allocate. 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 flat-dollar amount or a percentage of wages to employee accounts. A SEP IRA may be ideal for companies with fluctuating revenue streams. Compared to other retirement options, SEP IRAs lack expensive setup or ongoing fees.
SEPs function like traditional IRAs, where you contribute pre-tax dollars 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
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 savings option for the self-employed intended for businesses with no employees or where the only employee is a spouse. This type of plan operate much like employer-sponsored 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This allows for more savings compared to SEPs or IRAs; however, the additional opportunities may be offset by more restricted investment choices. Using a solo 401(k), you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses can set up 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:
- Deferrals as an employee of up to 100% of your earned income from self-employment, capped at the annual contribution limit. In 2025, those limits are $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your adjusted self-employment income, 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+ (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 guarantees a set amount to entrepreneurs upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but lets individuals clearly understand what they'll receive in retirement. This option is best suited for higher-income self-employed individuals who aim to accumulate a substantial amount for retirement and are willing to make sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income upon retirement.
Eligibility: Self-employed professionals managing a one-person company or employing fewer than five people may establish an individual defined benefit plan, but it's most commonly recommended for those over 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans tend to be:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Organizations with proven consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The maximum allowable contribution requires calculation from an actuary using your income, age, and retirement goals. Limits on contributions are adjusted each year.
The Importance of a Financial Advisor in Austin, TX for Your Self-Employed Retirement Plan
Partnering with an advisor in Austin, TX specialized in self-employed retirement plans can be an important asset for self-employed individuals. They bring the skills needed to guide you through the challenges of retirement planning and design a personalized approach that matches your objectives. Your advisor in Austin, TX will assess where you stand financially, understand your risk tolerance, and help you in selecting the best options about saving and investing for retirement. A key part of 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
- Help you understand the plan's terms
- Review and modify your plan when necessary
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Austin, TX: Correct Capital's Process
Austin, TX business owners who lack the time, interest, or knowledge to handle their own retirement planning themselves can become overwhelmed when faced with their available plans. At Correct Capital, our Austin, TX financial advisors take on the majority of your savings plan setup for you, working to make meeting your financial objectives as easy as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This short conversation lets us get a sense of your goals with no pressure or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll request information, including whether you have employees, your existing financial picture, and your future objectives. This helps us create a tailored approach that aligns with your goals.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll meet with you and discuss your plan thoroughly to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: After we agree on your plan, we'll implement the necessary steps so you can begin contributing. Over the course of our partnership, we'll check in and monitor your plan to ensure it stays suited to your needs.
Our Austin, TX financial advisors and retirement plan consultants are fiduciary advisors, meaning they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Austin, 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 Austin, TX
To you, your business is more than "just a business", and your Austin, TX financial advisors should provide more than basic financial recommendations. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to create customized self-employed retirement plans. We offer all our Austin, TX clients 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.
