Self-employed retirement plans in Central West End, MO. The freedom of running your own business in Central West End, MO is a fantastic aspect of working for yourself. But that freedom can come with limited stability, particularly in terms of building a retirement plan, employer-sponsored plans aren't an option. Only a fraction of self-employed individuals have a workplace retirement plan, but many would be better off exploring their options. In addition to setting you up for the retirement of your dreams, working with a financial advisor to get started and maintain your self-employed retirement plan in Central West End, MO offers tax benefits that can help free up much-needed funds for your business.
Not many financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner than Correct Capital. Our founder's father was a small business owner himself (you can read more about our story here). We have a deep understanding that your business and retirement goals go beyond spreadsheets and percentages, and we are committed to providing customized solutions that fit where you are and where you want to go. Read on to read more about your self-employed retirement plan options in Central West End, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a small business financial advisor now.
Types of Self-Employed Retirement Plans
There are many retirement savings options that the self-employed can establish, each with its own set of benefits and considerations. A Central West End, MO financial advisor can help you comprehend the advantages and disadvantages of each option and select that works best for you. Typically, your self-employed retirement plan options in Central West End, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that offer specific tax advantages. If you deposit to a traditional IRA, contributions are deducted from your taxable income, and investment earnings grow tax-deferred, but withdrawals in retirement are subject to income tax. In contrast, Roth IRA payments are made with money you've already paid taxes on, but you pay no taxes on withdrawals or earnings. In both a traditional an a Roth IRA, distributions can be made without extra fees 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 can be set up by anyone with an earned income.
Contribution Limits: For 2023, annual contribution limits 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 plans. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan if your business experiences periods of variable income. SEP IRAs don't have the high upfront costs or administrative expenses other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and withdrawals are taxed at your income at the time of withdrawal.
Eligibility: Any employer, including the self-employed, 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
- $66,000
For self-employed people, the maximum amount you can contribute in a given year is based on a specific formula.
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 businesses with no employees or who only employ a spouse. Solo 401(k)s function about the same as employer-sponsored 401(k) plans, and you can make contributions as an employee and on your own behalf as the employer. This offers increased savings opportunities than some other retirement savings plans, however the additional opportunities for saving are often counterbalanced by having less investment options available. In a one-participant 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
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 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 offers a a fixed benefit to self-employed individuals upon retirement. As opposed to the defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment returns, 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 significant sum for retirement and are willing to make substantial contributions. Contributions are tax deferred and withdrawals are taxed as income in retirement.
Eligibility: Any self-employed individual who runs a business with no employees besides the owner or has less than five employees can establish an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who want to save 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 decided by an actuary who calculates for your income, age, and retirement goals. Contribution limits are adjusted annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Central West End, MO
A financial advisor in Central West End, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the know-how to help you navigate the complexities of retirement planning and develop a personalized approach that acts as a roadmap through your financial future. A financial planner will evaluate 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
- Personalize the plan to your needs even further
- Adopt a written plan in accordance with IRS guidelines
- 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 support as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Central West End, MO: Correct Capital's Process
Central West End, MO business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become burdened with the different options available to them. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning for you, and attempt to make achieving the golden years of your dreams as easy as we possibly can. We can help you get set up with 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 understand if we're a good fit for you and your business. This short introduction allows us to get a feel for your needs with no major time investment on your part.
- Gather Information — If we both decide to move forward, we'll request more info, including how many employees you have (if any), your current finances, and your retirement goals. This allows us to put together a personalized plan based entirely on type of advising you need.
- 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 it's what you were looking for.
- 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 meet with you 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 in your best interest. We pride ourselves in providing clear communication and top-notch service to assist you achieve your self-employed retirement goals.
Other services we offer in Central West End, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
Call Correct Capital for Your Central West End, MO Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your Central West End, MO financial advisors need to offer more than simply sound financial advice. Correct Capital enjoys getting to know our clients and their business to deliver tailored self-employed retirement plans. We give all our Central West End, MO clients the same 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 Central West End, MO, speak to a member of our team today at 877-930-4015 or contact us online.
