Self-employed retirement plans Boston, MA. The flexibility of owning your own business in Boston, MA is one of the greatest advantages of working for yourself. That said, this freedom sometimes brings with a lack of security, particularly when it comes to retirement savings, because you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many could benefit from understanding their retirement options. In addition to enjoying a financially stable retirement, partnering with a financial advisor in Boston, MA to set up your self-employed retirement plan delivers significant tax advantages that enable both you and your business to thrive.
Few Boston, MA wealth management and retirement planning firms truly grasp the challenges faced by entrepreneurs as well as 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 assisting business owners in their retirement planning needs. We know that your professional and personal aspirations aren’t limited to basic numbers, and we work tirelessly to provide personalized solutions that reflect your objectives. Keep reading to learn more about your self-employed retirement plan options in Boston, MA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Boston, MA today.
Why Boston, MA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also deliver real benefits today. From flexible contributions to substantial tax savings, consulting a financial advisor in Boston, MA helps you create your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) gives you the option to modify how much you save:
- Customizable Contributions: Save extra during successful years and cut back when your earnings dip, ensuring your plan aligns with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you pay taxes on contributions now, allowing you to withdraw your savings tax-free down the road—a smart decision if you believe your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, allowing you to keep more of your earnings.
- 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 may be eligible for extra tax breaks as a business owner. These local incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 contributed a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across different stocks, bonds, and other assets serves to minimize exposure to risk while continuing to build your retirement fund.
- Emergency Back-Up: Pairing your retirement plan with a dedicated business safety net prevents you from using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Boston, MA Business
A thoughtful retirement strategy also helps you think through what’s next with your Boston, MA business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s remain yours and are not part of the sale. 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, deposits into these plans are capped at annual limits (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Strategically planning your contributions helps lower the taxes you might face when you sell your business.
- Succession Planning: For those winding down or handing over their business, your nest egg provide financial security through the transition. You can also work with a financial advisor who specializes in succession planning and retirement accounts to reduce taxes associated with the transaction.
With the proper savings strategy, you can take control of your financial future, lower your tax bill, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Boston, MA Now?
Time remains 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 lowers the financial burden of playing catch-up as you get older. This is why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement can have a substantial impact on the savings you’ll have when you stop working. The biggest reason is compound interest—the powerful process where your investments generate earnings, and those returns, subsequently, generate even more returns. The longer your money has to grow, the more significant the impact of this growth.
Example: Two individuals, Alex and Taylor are both self-employed professionals. They each aim 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 saves $7,500 annually to bridge the gap.
By age 65, using a projected 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily often create substantial growth. Here’s a simple scenario showing the impact of compounding:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
The earlier you begin, the lower your annual savings needs each year to reach your retirement goals.
*The numbers shown in this scenario are based on estimates generated with NerdWallet’s Compound Interest Calculator, based on a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. This information is intended as illustrative examples and do not guarantee future performance. Your individual results may differ depending on variables including market conditions, fees, and personal factors. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Boston, MA, it might seem easier to focus more on reinvesting in your business over saving for retirement. Even so, beginning a plan now enables you to:
- Leverage tax-deferred growth or penalty-free withdrawals down the road.
- Benefit from flexible contributions that change with your income.
- Establish a long-term safety measure that provides security, no matter how your business develops.
Starting early, the less you’ll need to worry about catching up later in life. Building your retirement savings today means gaining control over your financial future and creating for yourself the opportunity to focus on your goals—both for your future retirement and your Boston, MA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for entrepreneurs in Boston, MA, each with its own advantages and considerations. A financial advisor can help you learn about the benefits and drawbacks of each option and choose the one most suitable for your circumstances. Typically, your self-employed retirement plan options in Boston, MA include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that provide specific tax advantages. In a standard IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but money taken out during retirement are taxable. In contrast, Roth IRA contributions are made with after-tax income, but retirement withdrawals that qualify, including earnings, are not taxed. In both accounts, withdrawals are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, IRAs, including traditional and Roth options are available to anyone with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that permits those who are self-employed to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) allocate. If you have employees, you must 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 is a good option for entrepreneurs facing cycles of high revenue and low revenue. Compared to other retirement options, SEP IRAs lack expensive setup or ongoing fees.
SEPs work like traditional IRAs, where you contribute pre-tax dollars and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed 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
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, also called an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan designed for businesses with no employees or if the only employee is your spouse. This type of plan operate much like standard 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This provides more savings versus SEPs or IRAs; however, the increased savings potential can be balanced by more limited investment options. In a solo 401(k) 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 are eligible to open and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your earned income from self-employment, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your adjusted self-employment income, which is defined as 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 individuals aged 50+ (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan represents a type of retirement plan that guarantees a set amount to business owners upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but enables participants to determine exactly how much they'll have in retirement. This strategy is recommended for wealthier 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 are taxable as income upon retirement.
Eligibility: Entrepreneurs operating a solo business or with less than five employees can open an individual defined benefit plan, but it's typically advised for individuals aged 50+ who make $250,000 or more annually. Typically, good candidates for defined benefit plans are:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Businesses showing consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution is calculated by an actuary determined by your earnings, age, and retirement objectives. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Boston, MA for Your Self-Employed Retirement Plan
A financial advisor in Boston, MA specialized in self-employed retirement plans is an essential partner for entrepreneurs. They have the expertise to help navigate the complexities of retirement planning and develop a tailored strategy that matches your objectives. An expert in your area will assess where you stand financially, identify your risk preferences, and help you in choosing wisely about saving and investing for retirement. Part of what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Customize the plan to fit you personally even further
- Adopt a written plan as required by IRS rules
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Review and modify your plan when necessary
- Deliver continuous support and financial insights throughout your retirement planning process
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in Boston, MA: Correct Capital's Process
Boston, MA business owners who don’t have the time or expertise to handle their own retirement planning independently often feel overwhelmed when faced with their choices. At Correct Capital, our Boston, MA financial advisors take on the majority of your retirement strategy for you, working to make meeting your financial objectives as straightforward as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can help understand if we're a good fit for you and your business. This short conversation helps us learn about your needs with no obligation or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll request information, including whether you have employees, your present financial standing, and your long-term savings targets. This enables us to craft a custom plan that aligns with your goals.
- Review Your Plan: After we put together a plan from the information you provide, we'll schedule a meeting and discuss your plan thoroughly 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 put everything in place so you can start saving. As time goes on, we'll check in and track your progress to ensure it stays suited to your needs.
Our Boston, MA 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 Boston, MA include:
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 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 Boston, MA
To you, your business is more than "just a business", and your Boston, MA 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 deliver personalized self-employed retirement plans. All our clients in Boston, MA 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, contact Correct Capital now at 877-930-401k or contact us online.
