Self-employed retirement plans in Belleville, IL. The flexibility involved with having your own business in Belleville, IL is a wonderful advantage to working for yourself. But that freedom can be accompanied by limited stability, particularly in terms of saving for retirement, you don't have an employer who will set up a plan for you. Only a fraction of self-employed individuals have retirement plans they can contribute to, but many would be better off exploring their options. In addition to a more comfortable retirement, partnering with a financial advisor to get started and maintain your self-employed retirement plan in Belleville, IL offers favorable tax incentives that can help you improve your bottom line.
Only a handful of wealth management and retirement planning firms will understand the needs of the self-employed and small business owners as well as Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can discover more about our story on our website). We know that your business and retirement goals extend far beyond figures and numbers, and we are dedicated to offering customized solutions that fit where you are and where you want to go. Read on to learn more about your self-employed retirement plan options in Belleville, IL, or call Correct Capital at 877-930-4015 or contact us online to speak to a small business financial advisor at your convenience.
What Self-Employed Retirement Plans Are There?
There are several retirement savings options available for self-employed individuals, each with its own set of benefits and considerations. A Belleville, IL financial advisor can help you understand the pros and cons of each option and choose that helps both your short- and long-term goals. Generally, your self-employed retirement plan options in Belleville, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that provides individuals with tax advantages to save for retirement. In a traditional IRA, contributions are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are liable to income tax. On the other hand, Roth IRA payments are made with money you've already paid taxes on, but you pay no taxes on withdrawals or investment gains. In both a traditional an a Roth IRA, withdrawals are penalty-free as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are available to 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 percentage of of their net earnings from self-employment. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, you must contribute an equal amount to their pensions. You may choose to contribute either a fixed dollar sum or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan for businesses that go through fluctuating income periods. SEP IRAs don't have expensive initial setup or administrative charges often associated with other retirement plans.
SEPs work like traditional IRAs, where payments are made with money you've yet to pay taxes on and distributions are taxed at your income at the time of withdrawal.
Eligibility: Self-employed individuals and any employer, can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the amount eligible to be contributed is decided by a special calculation.
Solo 401(k)
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 whose only employee is a spouse. Solo 401(k)s function about the same as employer-sponsored 401(k) plans, and you can make contributions as both an employer or employee with pre-tax money. This offers greater potential for savings than some other retirement savings plans, however the additional opportunities for saving are often offset by more limited investment options. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax advantages as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses have access to one-participant 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 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 a maximum of 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 a fixed benefit to self-employed individuals after they've left the workforce. In contrast to 401(k)s or IRAs, a defined benefit plan doesn't go up and down based on investment returns, but allows self-employed people to know exactly what they'll receive in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a large amount for retirement and are willing to add substantial contributions. Contributions are tax deferred and withdrawals are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs a business where they're the only owner or has less than five employees can establish an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who desire to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to do more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is calculated by an actuary who calculates for your income, age, and retirement goals. Contribution limits change annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Belleville, IL
A financial advisor in Belleville, IL specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the expertise to help you navigate the intricacies of retirement planning and create a customized plan that aligns with your goals. A financial planner will analyze where your finances currently are, help you figure out your risk tolerance, and help you make smart decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Personalize the plan to your needs even further
- Adopt a written plan that follows all IRS rules
- Arrange a trust plan for assets
- Implement a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance into and through retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Belleville, IL: Correct Capital's Process
Belleville, IL 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 when looking at their options. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning for you, and endeavor to make meeting your retirement goals as easy as possible for you. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes 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 understand what you're looking for with no major time investment on your part.
- Gather Information — If we seem like a good fit, we'll ask for more info, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to live. 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 details 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 you can start saving. As long as we work together, 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 advisors and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's best for you and only you. We are proud to provide clear communication and top-notch service to assist you attain your self-employed retirement goals.
Other services we offer in Belleville, IL include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
Call Correct Capital for Your Belleville, IL Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your Belleville, IL financial advisors need to offer more than merely sage 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 give all our Belleville, IL 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 Belleville, IL, speak to a member of our team today at 877-930-4015 or fill out our online form.
