Self-employed retirement plans Chicago, IL. The freedom of running your own company in Chicago, IL offers many benefits of having a self-directed career. However, this freedom can come with a lack of security, especially regarding planning for retirement, as you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many could benefit from looking into other possibilities. In addition to enjoying a more secure retirement, partnering with a financial advisor in Chicago, IL to establish your self-employed retirement plan offers significant tax advantages that allow you to move your business forward.
Few Chicago, IL financial advisory and retirement planning firms are as attuned to the requirements of entrepreneurs as well as Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (check out our story here), and we take pride in assisting business owners in their retirement planning needs. We understand that your business and retirement aspirations go far beyond basic numbers, and we are dedicated to provide personalized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Chicago, IL, or call Correct Capital at 877-930-401k or contact us online to speak with a small business financial advisor in Chicago, IL today.
Why Chicago, IL 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 tangible benefits today. Offering flexibility in contributions to significant tax savings, working with a financial advisor in Chicago, IL helps you customize your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) offers the freedom to modify how much you save:
- Customizable Contributions: Save extra during high-income years and scale back when revenues are down, so your plan works with your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw tax-free later—an advantageous choice if you believe your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) 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: Depending on where you live, you could qualify for extra deductions as a self-employed individual. These regional incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can apply for a credit of up to 50% of the first $2,000 they contribute a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement goes beyond just how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of asset classes like stocks and bonds is a smart way to reduce risk while helping to grow your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund prevents you from dipping into savings during challenging periods and risking extra costs.
Plan for the Future of Your Chicago, IL Business
Retirement planning can assist you think through what’s next with your Chicago, IL business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s remain yours and don’t transfer with the business. These accounts offer the steady income you’ll need in the future. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are capped at annual 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 transfer your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts ensure the funds you need during the change. You might want to partner with a financial advisor experienced in both succession and retirement strategies to reduce taxes during the sale.
With the right retirement plan, you manage your financial future, cut down your tax obligations, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Chicago, IL Now?
There’s no denying that time is one of the most valuable assets when it comes to saving for retirement. Beginning sooner rather than later not only helps you grow a more substantial retirement fund but also minimizes the stress 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 could lead to a major impact on the amount you’ll have when you reach retirement age. The biggest reason is compound interest—the powerful process where your investments grow, and those returns, in turn, accumulate even more returns. The longer your money has to grow, the larger the effect of this compounding process.
Example: Alex and Taylor are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor waits until age 40 but contributes $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently may result in substantial growth. Take a look at this scenario showing the power of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an average annual return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month would result in only $235,412.97* by age 65—a shortfall of over $260,000, simply due to a 10-year delay.
The earlier you begin, the less effort required each year to achieve your retirement goals.
*The figures provided in this example represent estimates generated with NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. These examples are intended as illustrative examples and are not a promise of future results. Your individual results may differ depending on elements like market conditions, fees, and personal factors. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Chicago, IL, it can be tempting to put more emphasis on reinvesting in your business over saving for retirement. Even so, beginning a plan now enables you to:
- Take advantage of tax-deferred growth or penalty-free withdrawals in the future.
- Enjoy flexible contributions that adapt to your earnings.
- Build a safety net that ensures stability, no matter how your business evolves.
The sooner you start, the less you’ll need to worry about catching up later in life. Building your retirement savings today means taking control of your financial future and creating for yourself the ability to concentrate on your goals—both for your golden years and your Chicago, IL business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for self-employed individuals in Chicago, IL, each providing its own benefits and trade-offs. A financial advisor is available to help you evaluate the pros and cons of each choice and identify the one ideal for your needs. Generally speaking, your self-employed retirement plan options in Chicago, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that provide distinct tax benefits. In a traditional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but withdrawals in retirement are taxed as income. In contrast, Roth IRA contributions from post-tax earnings, but eligible distributions during retirement, including earnings, are tax-free. In both cases, withdrawals come without penalties as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, both traditional and Roth IRAs 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: The Simplified Employee Pension IRA offers a way to save for retirement that allows those who are self-employed to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role beyond the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. You may choose to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA is a good option for companies with periods of inconsistent earnings. Compared to other retirement options, SEP IRAs are free of expensive setup or ongoing fees.
SEPs function like standard IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan designed for companies that have no employees or where the only employee is a spouse. Solo 401(k)s function similarly to traditional employer-managed 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This allows for more savings versus SEPs or IRAs; however, the increased savings potential may be offset by more limited investment options. 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: Only 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 have the ability to make two types of contributions:
- Employee contributions of up to 100% of your self-employed earnings, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 25% of your adjusted self-employment income, which is calculated as net profits less half of your self-employment tax and the elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 for individuals aged 50+ (as of 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that delivers a fixed, predetermined benefit to self-employed individuals upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but lets individuals clearly understand what they'll have in retirement. This option is ideal for wealthier entrepreneurs who want to save a significant sum for retirement and are prepared to contribute larger deposits. Contributions offer tax-deferred growth, and withdrawals incur taxes as income upon retirement.
Eligibility: Entrepreneurs running an owner-only business or employing fewer than five people can open an individual defined benefit plan, but it's generally recommended for people above age 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Companies with proven consistent profit patterns
- Entrepreneurs over age 40 who wish to accelerate savings or boost savings within a short timeframe
Contribution Limits: The contribution limit is calculated by an actuary based on your financial situation, age, and savings targets. Limits on contributions change annually.
The Importance of a Financial Advisor in Chicago, IL for Your Self-Employed Retirement Plan
Working with a financial advisor in Chicago, IL focused on self-employed retirement strategies serves as an important asset for those working for themselves. They bring the skills needed to navigate the complexities of retirement planning and design a personalized approach that matches your objectives. A financial advisor in Chicago, IL will assess where you stand financially, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. A key part of what we do for you involves:
- Help you choose a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Formalize a plan in writing as required by IRS rules
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Offer continued financial education and guidance throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Chicago, IL: Correct Capital's Process
Self-employed individuals in Chicago, IL who don’t have the time or expertise to oversee their retirement savings strategy on their own can become overwhelmed as they look at their available plans. With Correct Capital, our Chicago, IL financial advisors handle the bulk of your retirement strategy for you, to help make meeting your future savings targets as easy as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can determine if our services align for you and your business. This short conversation lets us understand what you're looking for with no obligation or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll gather information, including how many employees you have (if any), your present financial standing, and your retirement goals. This helps us create a tailored approach designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll meet with you and discuss your plan in detail to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll implement the necessary steps so you can start saving. Throughout our relationship, we'll meet with you and review your strategy to make sure it remains aligned with your goals.
Our Chicago, IL financial advisors and retirement plan consultants are fiduciary advisors, who are obligated to they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Chicago, IL include:
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
Call Correct Capital for Your Self-Employed Retirement Plan in Chicago, IL
To you, your business is more than "just a business", and your Chicago, IL financial advisors must deliver more than basic financial recommendations. With Correct Capital, we take the time to get to know our clients and their businesses to provide customized self-employed retirement plans. All our clients in Chicago, IL benefit from our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To get started on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
