Self-employed retirement plans in Chesterfield, MO. The flexibility involved with running your own business in Chesterfield, MO is a fantastic aspect of being self-employed. But increased leeway can come with uncertainty, especially in in regards to saving for retirement, employer-sponsored plans aren't an option. Only 13% of self-employed individuals have retirement plans they save with, but many would be wise to look into what plans are available. In addition to setting you up for the retirement of your dreams, working with a financial advisor to set up your self-employed retirement plan in Chesterfield, MO offers significant tax advantages that can help you improve your bottom line.
Not many financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can learn more about our story on our website). We know that your business and retirement aspirations go beyond spreadsheets and percentages, and we are devoted to offering customized solutions that fit your goals. Read on to read more about your self-employed retirement plan options in Chesterfield, MO, or call Correct Capital at 877-930-4015 or contact us online to speak to a member of our advisory team at your convenience.
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Types of Self-Employed Retirement Plans
There are a few different retirement savings plans that the self-employed can contribute to, each with its own set of advantages and considerations. A Chesterfield, MO financial advisor can help you understand the pros and cons of each option and choose that works best for you. Typically, your self-employed retirement plan options in Chesterfield, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that allows you to set aside money for the future, with special tax considerations. If you deposit to a traditional IRA, deposits are deducted from your taxable income, and any gains on investments grow tax-deferred, but withdrawals in retirement are subject to income tax. In contrast, Roth IRA deposits are made with after-tax income, but you pay no taxes on withdrawals or earnings. In both accounts, withdrawals can be made without extra fees if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through employment, traditional and Roth IRAs are available to 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. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot exceed 25%. If you have employees, you would have to contribute the same amount for them as you do for yourself. You may choose to contribute either a fixed dollar sum or a percentage of annual income to employee accounts. SEP IRAs may be a suitable self-employed retirement plan for businesses that go through periods of variable income. SEP IRAs don't have expensive initial setup or administrative charges other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with money you haven't paid taxes on and withdrawals are taxed at your income at the time of distribution.
Eligibility: Self-employed individuals and any employer, can set up a SEP.
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 decided by 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 sole proprietors or those whose only employee is a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can add funds as both an employer or employee with pre-tax money. This offers increased savings opportunities than SEPs or IRAs, however the possibility of greater retirement savings is often counteracted by more limited investment options. In a one-participant 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 can establish and contribute to a solo 401(k).
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 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.
The total contribution 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 predetermined benefit to self-employed individuals upon retirement. In contrast to other types of retirement plans, a defined benefit plan doesn't oscillate 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 substantial portion 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 open an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn well into the six figures. 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 willing to contribute more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit is calculated by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted each year.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Chesterfield, MO
A financial advisor in Chesterfield, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the know-how to help you understand the intricacies of retirement planning and design a customized plan that acts as a roadmap through your financial future. A financial advisor will look at your financial situation, help you figure out your risk tolerance, and guide you in making informed decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan that follows all IRS regulations
- 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 into and through retirement
- Increase your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Chesterfield, MO: Correct Capital's Process
Chesterfield, MO business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become overwhelmed with the different plans available to them. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work for you, and attempt to make meeting the golden years of your dreams as simple as possible for you. We can help you get set up with your self-employed retirement plan in four simple steps:
- Schedule a Call — We only need 20 minutes for one of our advisors to understand if we're the best firm to help you reach your goals. This short introduction lets us understand what you're looking for with no obligation for you.
- Gather Information — If we both decide to move forward, we'll request information, 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 based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and discuss the details of your plan to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've agreed on 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 so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's best for you and only you. We pride ourselves in providing clear communication and high-quality service to help you reach your self-employed retirement goals.
Other services we offer in Chesterfield, MO include:
Call Correct Capital for Your Chesterfield, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Chesterfield, MO financial advisors need to offer more than merely sound financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver personalized self-employed retirement plans. We offer all our Chesterfield, 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 Chesterfield, MO, call Correct Capital today at 877-930-4015 or contact us online.
