Self-employed retirement plans in Ballwin, MO. The freedom of running your own business in Ballwin, MO is one of the great things about working for yourself. But that freedom can come with a lack of security, especially in terms of building a retirement plan, you don't have an employer who will set up a plan for you. Only 13% of self-employed people have retirement plans they can contribute to, but many would be wise to explore what plans are available. In addition to setting you up for the retirement of your dreams, partnering with a financial advisor to get started and maintain your self-employed retirement plan in Ballwin, MO offers significant tax advantages that can help you improve your bottom line.
Only a handful of wealth management and retirement planning firms know what it's like to be self-employed or a small business owner than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can learn more about our story here). We have a deep understanding that your business and retirement goals go beyond figures and numbers, and we are dedicated to providing tailored plans that reflect where you are and where you want to go. Continue reading to learn more about your self-employed retirement plan options in Ballwin, MO, or call Correct Capital at 314-930-401(k) or fill out our online form to speak to a member of our advisory team now.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings options that the self-employed can set up, and which is best for you depends on your unique situation. A Ballwin, MO financial advisor can help you grasp the benefits and drawbacks of each option and choose that works best for you. Typically, your self-employed retirement plan options in Ballwin, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that provides individuals with tax advantages to save for retirement. In a traditional IRA, deposits are typically tax-deductible, and any gains on investments grow tax-deferred, but withdrawals in retirement are liable to income tax. In contrast, Roth IRA payments are made with money you've already paid taxes on, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals can be made without penalty if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through an employer, traditional and Roth IRAs can be set up by anyone with an earned income.
Contribution Limits: For 2023, the maximum yearly contributions for IRAs are $6,500, or $7,500 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that allows self-employed individuals to contribute a share of of their annual income from self-employment. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. If you have employees, you must contribute an equal amount to their plans. You can either contribute a flat-dollar amount or a percentage of annual income to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that go through periods of variable income. SEP IRAs don't have the high upfront costs or administrative expenses often associated with other retirement plans.
SEPs work like traditional IRAs, where deposits are made with pre-tax money and withdrawals are taxed at your income at the time of withdrawal.
Eligibility: Self-employed individuals and any employer, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
For self-employed people, the amount eligible to be contributed is decided by a specific formula.
Plan Overview: A Solo 401(k) plan, also known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan for sole proprietors or those who only employ a spouse. Solo 401(k)s function similarly to employer-sponsored 401(k) plans, and you can make contributions as both an employer or employee with pre-tax money. This offers more savings than SEPs or IRAs, however the possibility of greater retirement savings is often offset by having less investment options available. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses have access to individual 401(k)s.
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you can make two types of contributions:
- Elective deferrals (as an employee) of a maximum of 100% of your earned income from self-employment, up to the annual contribution limit. In 2023, those limits are $22,500, or $30,000 if you are 50 or older.
- Employer profit-sharing contributions (as an employer) which cannot exceed up to 25% of your net self-employment income, which is your net profit minus half of your self-employment tax and the elective deferrals you made.
On an annual basis, contributions cannot exceed $66,000, or $73,500 if you're over age 50 (in 2023).
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement plan that provides a an assured benefit to self-employed individuals once they've retired. As opposed to the defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate because of investment gains, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a substantial portion for retirement and want to add substantial contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can open an individual defined benefit plan, but it's typically only recommended for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who want to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to contribute more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who want to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit must be calculated by an actuary based on your income, age, and retirement goals. Contribution limits change annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Ballwin, MO
A financial advisor in Ballwin, MO specialized in self-employed retirement plans can be indispensable for self-employed individuals. They have the expertise to help you understand the complexities of retirement planning and develop a personalized approach that aligns with your goals. A financial planner will look at where your finances currently are, help you figure out your risk tolerance, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Adopt a written plan in accordance with IRS rules
- Arrange a trust plan for assets
- Create a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and support as you continue on the road to retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Ballwin, MO: Correct Capital's Process
Ballwin, MO business owners who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become overwhelmed with the different options available to them. At Correct Capital, our financial advisors handle the bulk of the retirement planning work for you, and strive to make achieving your retirement goals as easy as we possibly can. We can help you establish and maintain your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need 20 minutes for a member of our advisor team to know if we're the best firm to help you reach your goals. This short introduction allows us to get a feel for what you're looking for with no major time investment on your part.
- Gather Information — If we both decide to move forward, we'll ask for information, including the number of employees in your business (if applicable), your current finances, and your retirement goals. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and go over the specifics of your plan to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so your savings can start growing immediately. Throughout your time partnering with us, we'll keep you up-to-date with how things are going and monitor your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and morally bound to do what's in your best interest. We are proud to provide straightforward communication and excellent service to help you attain your self-employed retirement goals.
Other services we offer in Ballwin, MO include:
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
Call Correct Capital for Your Ballwin, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Ballwin, MO financial advisors need to provide you with more than merely wise financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver customized self-employed retirement plans. We offer all our Ballwin, MO clients our I.O.U. promise: all of the advice we give you will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Ballwin, MO, call Correct Capital today at 314-930-401(k) or fill out our online form.