Self-employed retirement plans Chicago, IL. The flexibility of being your own boss in Chicago, IL is one of the best aspects of being self-employed. However, this flexibility often comes with a lack of security, especially in terms of retirement savings, as you don't have the option of a workplace retirement plan. 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, seeking advice from a financial advisor in Chicago, IL to create your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Chicago, IL wealth management and retirement planning firms understand the needs of entrepreneurs as well as Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and we take pride in helping businesses with their retirement planning needs. We know that your professional and personal aspirations go far beyond simple financial figures, and we are dedicated to create tailored solutions aligned with your vision. Read on to discover about your self-employed retirement plan options in Chicago, IL, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a self-employed financial advisor in Chicago, IL today.
Why Chicago, IL Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide tangible benefits today. Offering flexibility in contributions to substantial tax savings, partnering with a financial advisor in Chicago, IL helps you design your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) offers the option to modify how much you save:
- Customizable Contributions: Save extra during high-income years and scale back when your earnings dip, so your plan fits your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw without tax penalties in the future—a wise move if you expect your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans deliver significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to grow.
- State-Specific Incentives: Based on your location, you may be eligible for additional credits as a sole proprietor. These regional incentives help make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and alternatives serves to reduce risk while continuing to build your savings.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net ensures you don’t using your retirement funds during financial hardships and incurring penalties.
Plan for the Future of Your Chicago, IL Business
A thoughtful retirement strategy also helps you plan ahead for what’s next with your Chicago, IL business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and are not part of the sale. These accounts can provide the financial stability you’ll need later on. It’s important to note that while the sale of a business usually creates a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you might face when you sell your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts ensure financial security as you make this shift. You might want to partner with a financial advisor experienced in both succession and retirement strategies to help with taxes during the sale.
With the right retirement plan, you can take control of your financial future, reduce your tax burden, and build a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Chicago, IL Now?
Time remains one of the most valuable assets in retirement planning. Starting early not only allows you to build a larger nest egg but also lowers the financial burden of saving aggressively in the future. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement could lead to a major impact on the amount you’ll have when you retire. The primary reason is compound interest—the financial principle where your investments grow, and those returns, then, generate even more returns. The longer your money has to grow, the more significant the impact of this compounding process.
Example: Alex and Taylor are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but puts away $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor invests $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 impact of consistent growth:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, just from a 10-year delay.
Saving early, the less you need to save each year to meet your retirement goals.
*The numbers shown in this scenario are based on estimates generated with NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. This information is for illustrative purposes only and are not a promise of future results. Outcomes may change due to variables including market conditions, fees, and your unique situation. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Chicago, IL, it can be tempting to prioritize reinvesting in your business instead of saving for retirement. Even so, starting a plan now allows you to:
- Leverage tax-free future growth or withdrawals without taxes in the future.
- Benefit from adjustable savings that adapt to your earnings.
- Create a long-term safety measure that ensures stability, no matter how your business develops.
Getting started now, the less you’ll need to worry about making up for lost time later in life. Taking steps toward your retirement goals today means taking control of your financial future and allowing yourself the freedom to focus on your dreams—both for your retirement years and your Chicago, IL business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for those working for themselves in Chicago, IL, each providing its own benefits and trade-offs. A financial advisor will guide you to learn about the pros and cons of each choice and determine the one ideal for your circumstances. In most cases, 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 offer distinct tax benefits. In a traditional IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but withdrawals in retirement are subject to income tax. In contrast, Roth IRAs require contributions using income already taxed, but qualified withdrawals in retirement, including earnings, are tax-free. In both types of accounts, withdrawals come without penalties if 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 open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that enables entrepreneurs 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 above the 25% you (the employer) have designated. If you have employees, it's required to contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs is a good option for companies with periods of inconsistent earnings. Compared to other retirement options, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs function like standard IRAs, where you contribute pre-tax dollars and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for businesses without employees or when the sole employee is your spouse. Solo 401(k)s operate much like traditional employer-managed 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This offers more savings compared to 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: 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:
- Elective deferrals (as an employee) of up to 100% of your self-employed earnings, 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) are limited to 25% of your net earnings from self-employment, 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 if you're over age 50 (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that provides a pre-established payout to business owners upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but enables participants to determine what they'll get in retirement. This plan is recommended for high-earning self-employed individuals who aim to accumulate a substantial amount for retirement and are prepared to contribute larger deposits. Contributions are tax deferred, and withdrawals are taxed as income during retirement.
Eligibility: Any self-employed individual running an owner-only business or with a small staff of under five may establish an individual defined benefit plan, but it's generally recommended for those over 50 who make $250,000 or more annually. In most cases, good candidates for defined benefit plans include:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% with plans to contribute more
- Companies with proven consistent profit patterns
- Entrepreneurs 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 earnings, age, and retirement objectives. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Chicago, IL for Your Self-Employed Retirement Plan
Working with a financial advisor in Chicago, IL experienced with retirement plans for the self-employed is an invaluable resource for those working for themselves. They bring the skills needed to understand the intricacies of saving for retirement and craft a customized plan that aligns with your goals. Your advisor in Chicago, IL will evaluate your financial situation, determine how much risk you’re comfortable with, and guide you in selecting the best options about saving and investing for retirement. Part of what we do for you includes:
- Help you choose a plan that aligns with your objectives and circumstances
- Customize the plan to fit you personally even further
- Formalize a plan in writing as required by IRS rules
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Track and fine-tune your plan as needed
- Offer continued financial education and guidance to help you navigate your retirement journey
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Chicago, IL: Correct Capital's Process
Chicago, IL business owners who aren’t equipped with the time or understanding to handle their self-employed retirement plan themselves may end up overwhelmed by their available plans. With Correct Capital, our Chicago, IL financial advisors take on the lion's share of your savings plan setup for you, to help make meeting your financial objectives as hassle-free as possible for you. We can help you get set up your self-employed retirement plan in just four steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can determine if we're suited to your needs for you and your business. This initial call helps us learn about your needs with no pressure or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll gather information, including your employee count, your existing financial picture, and your long-term savings targets. This allows us to put together a custom plan designed just for you.
- Review Your Plan: Once we've developed a plan based on the information you provide, we'll sit down with you and go over your plan in detail to ensure you understand it and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. Over the course of our partnership, we'll check in and track your progress to ensure it stays suited to your needs.
Our Chicago, IL financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Chicago, IL include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Chicago, IL
Your business isn't "just a business" to you, and your Chicago, IL financial advisors should provide more than simply sound financial advice. Correct Capital takes pride in, we focus on building a relationship with our clients and their businesses to provide tailored self-employed retirement plans. We offer all our Chicago, IL clients 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.
