Self-employed retirement plans Boston, MA. The independence of being your own boss in Boston, MA is one of the greatest advantages of being self-employed. Even so, this flexibility sometimes brings with a lack of security, notably when it comes to building your retirement fund, as you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from exploring their options. In addition to having a more comfortable retirement, partnering with a financial advisor in Boston, MA to establish your self-employed retirement plan can provide significant tax advantages that help your business to grow and succeed.
Few Boston, MA investment consulting and retirement planning firms are as attuned to the requirements of entrepreneurs better than Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and we take pride in assisting business owners in their retirement planning needs. We know that your business and retirement aspirations extend well past just monetary concerns, and we are dedicated to offer tailored solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in Boston, MA, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Boston, MA today.
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Why Boston, MA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver real benefits today. Offering flexibility in contributions to significant tax savings, consulting a financial advisor in Boston, MA helps you customize your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income over time, a plan like a SEP IRA or Solo 401(k) gives you the freedom to adjust how much you save:
- Customizable Contributions: Save extra during successful years and scale back when income is lower, so that your plan works with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw your savings tax-free down the road—an advantageous choice if you expect your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, providing your money more time to grow.
- State-Specific Incentives: In some states, you might access additional credits as a self-employed individual. These state-level incentives help make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can claim a tax credit of up to 50% of the first $2,000 contributed 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 linked to the way you invest:
- Diversified Portfolios: Allocating your investments across a mix of stocks, bonds, and alternatives serves to minimize exposure to risk while still growing your retirement fund.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net helps you avoid using your retirement funds during financial hardships and incurring penalties.
Plan for the Future of Your Boston, MA Business
Retirement planning enables you to plan ahead for what’s next with your Boston, MA business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and won’t be included in the sale. These savings can provide the reliable income you’ll need in the future. It’s important to note that while selling a business often leads to a capital gain, deposits into these plans 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, according to plan rules).
- Minimizing Taxes: Strategically planning your contributions minimizes 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 a stable foundation during the change. You may also seek advice from a financial advisor with expertise in succession and retirement planning to minimize tax burdens associated with the transaction.
With the proper savings strategy, you gain control over your financial future, lower your tax bill, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Boston, MA Now?
Time is one of the most crucial factors for building your retirement fund. Starting early not only allows you to build a bigger financial cushion but also minimizes the pressure of saving aggressively in the future. The following are reasons why it pays to take action now:
The Cost of Waiting
Waiting to start your retirement fund can have a major impact on the amount you’ll have when you retire. The biggest reason is compound interest—the concept where your investments generate earnings, and those returns, subsequently, accumulate even more returns. The more time your money has to grow, the greater the impact of compounding.
Example: Taylor and Alex are both self-employed individuals. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but saves $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex contributes $180,000 and accumulates $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time may result in impressive growth. Consider this example showing the effect of compound interest:
- Starting at age 25: By investing $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll end up with $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.
Starting sooner, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example are estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of 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 meant to provide general guidance and are not a promise of future results. Outcomes may change due to variables including market conditions, fees, and individual circumstances. Always consult a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in Boston, MA, it can be tempting to prioritize reinvesting in your business instead of saving for retirement. However, beginning a plan now enables you to:
- Benefit from growth that is tax-deferred or penalty-free withdrawals in the future.
- Take advantage of adjustable savings that adapt to your earnings.
- Establish a financial cushion that provides security, no matter how your business develops.
The sooner you start, the less you’ll be required to worry about making up for lost time later in life. Saving for retirement now means managing your financial future and creating for yourself the opportunity to concentrate on your objectives—both for your future retirement and your Boston, MA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options open for those working for themselves in Boston, MA, each providing its own pros and cons. A financial advisor will guide you to evaluate the advantages and disadvantages of each option and determine the one most suitable for your needs. Typically, your self-employed retirement plan options in Boston, MA consist of:
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 conventional IRA, the money you contribute is often tax-deductible, and investment earnings grow tax-deferred, but money taken out during retirement are taxable. In contrast, Roth IRAs require contributions from post-tax earnings, but retirement withdrawals that qualify, including earnings, are tax-free. In both cases, 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, IRAs, including traditional and Roth options are available to anyone with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that allows self-employed individuals to contribute a percentage of their net earnings. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) would not be able to contribute above the 25% you (the employer) already contributed. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a fixed dollar figure or a percentage of wages to employee accounts. SEP IRAs may be ideal for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs lack expensive setup or ongoing fees.
SEPs work like traditional IRAs, where the contributions are tax-deferred and money withdrawn is subject to income tax.
Eligibility: Both employers and self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), also called an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan meant for businesses without employees or if the only employee is your spouse. These plans operate much like employer-sponsored 401(k) plans, and enable contributions as both an employee or an employer with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the additional opportunities often come with more restricted investment choices. Using a solo 401(k), you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses are eligible to open 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:
- Employee contributions 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 are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that delivers a set amount to entrepreneurs upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but enables participants to determine the precise amount they'll have in retirement. This plan is ideal for higher-income professionals who aim to accumulate a substantial amount for retirement and are willing to make sizeable contributions. Contributions offer tax-deferred growth, and withdrawals are taxed as income upon retirement.
Eligibility: Any self-employed individual operating a solo business or employing fewer than five people can open an individual defined benefit plan, but it's typically advised for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans tend to be:
- Partners or owners who desire to contribute more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Businesses with proven consistent profit patterns
- Partners or owners over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The contribution limit must be determined by an actuary using your financial situation, age, and savings targets. Limits on contributions are adjusted each year.
The Importance of a Financial Advisor in Boston, MA for Your Self-Employed Retirement Plan
Partnering with an advisor in Boston, MA focused on self-employed retirement strategies is an essential partner for entrepreneurs. They bring the skills needed to understand the intricacies of saving for retirement and develop a tailored strategy that matches your objectives. Your advisor in Boston, MA will evaluate your financial situation, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. A key part of what we do for you includes:
- Help you choose a plan that suits your unique requirements
- Further adapt the plan to fit you personally even further
- Formalize a plan in writing that complies with IRS regulations
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Track and fine-tune your plan when necessary
- Offer continued financial education and guidance to help you navigate your retirement journey
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Boston, MA: Correct Capital's Process
Self-employed individuals in Boston, MA who aren’t equipped with the time or understanding to oversee their self-employed retirement plan on their own may end up overwhelmed when faced with their options. Through our team at Correct Capital, our Boston, MA financial advisors handle the majority of your retirement strategy for you, to help make meeting your retirement goals as easy as possible for you. We are here to assist you in setting up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: In just 20 minutes, a member of our advisor team can determine if we're a good fit for you and your business. This short conversation helps us understand what you're looking for with no pressure or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll request information, including how many employees you have (if any), your current financial situation, 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 sit down with you and review your plan step by step to ensure you understand it and show how it aligns with your goals.
- 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 keep it tailored to your evolving circumstances.
Our Boston, MA financial advisors and retirement plan consultants act as fiduciary advisors, which means they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in Boston, MA 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 Boston, MA
Your business isn't "just a business" to you, and your Boston, MA financial advisors should provide more than just good financial guidance. At Correct Capital, we focus on building a relationship with our clients and their businesses to create tailored self-employed retirement plans. We offer all our Boston, MA clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To begin on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
