Self-employed retirement plans Chicago, IL. The freedom of running your own company in Chicago, IL is one of the best aspects of being self-employed. However, this freedom often comes with a lack of security, especially in terms of building your retirement fund, because you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off looking into other possibilities. In addition to having a financially stable retirement, partnering with a financial advisor in Chicago, IL to create your self-employed retirement plan can provide significant tax advantages that enable both you and your business to thrive.
Few Chicago, IL financial advisory and retirement planning firms truly grasp the challenges faced by self-employed individuals quite like Correct Capital. The father of our founder was a small business owner himself (check out our story here), and Correct Capital take pride in assisting business owners in their retirement planning needs. We understand that your goals for your business and retirement go far beyond simple financial figures, 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 self-employed financial advisor in Chicago, IL today.
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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. With customizable contribution options to substantial tax savings, working with a financial advisor in Chicago, IL helps you design your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
When your earnings vary over time, a plan like a SEP IRA or Solo 401(k) offers the freedom to adjust how much you save:
- Customizable Contributions: Set aside more during high-income years and reduce savings when your earnings dip, ensuring your plan works with your cash flow.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw without tax penalties in the future—a smart decision if you expect your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, helping you keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to compound.
- State-Specific Incentives: In some states, you could qualify for extra tax breaks as a sole proprietor. These regional incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, helping to lower 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 linked to the way you invest:
- Diversified Portfolios: Spreading your investments across varied asset classes like stocks and bonds is a smart way to mitigate financial risk while helping to grow your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a financial buffer for your business ensures you don’t tapping into your nest egg during tough times and risking extra costs.
Plan for the Future of Your Chicago, IL Business
Preparing for retirement enables you to think through what’s next with your Chicago, IL business:
- Selling Your Business: When selling your business, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and don’t transfer with the business. These savings offer the reliable income you’ll need in the future. Keep in mind that while the sale of a business usually creates a capital gain, retirement plan contributions are restricted by contribution limits (e.g., up to $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Strategically planning your contributions helps lower the taxes you’ll owe when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your retirement savings ensure financial security through the transition. You may also seek advice from a financial advisor experienced in both succession and retirement strategies to minimize tax burdens on the sale.
With the best-fit retirement strategy, you manage your financial future, lower your tax bill, and create a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Chicago, IL Now?
Time is one of the most important assets when it comes to saving for retirement. Starting early not only lets you accumulate a larger nest egg but also minimizes the financial burden 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 may cause a major impact on the amount you’ll have when you stop working. The main reason is compound interest—the financial principle where your investments grow, and those returns, subsequently, accumulate even more returns. The longer your money has to grow, the greater the effect of this compounding process.
Example: Taylor and Alex are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor delays savings until age 40 but contributes $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings invested steadily can lead to significant growth. Take a look at this scenario showing the effect of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an projected return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Investing 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 you need to save each year to reach your retirement goals.
*The figures provided in this example are based on estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are intended as illustrative examples and are not a promise of future results. Your individual results may differ due to factors such as market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Chicago, IL, it might seem easier to prioritize reinvesting in your business instead of saving for retirement. Even so, beginning a plan now enables you to:
- Leverage tax-free future growth or tax-free withdrawals later on.
- Enjoy adjustable savings that align with your income.
- Build a long-term safety measure that offers peace of mind, no matter how your business develops.
Starting early, the less you’ll need to worry about catching up later in life. Saving for retirement now means taking control of your financial future and allowing yourself the freedom to focus on your goals—both for your golden years and your Chicago, IL business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for those working for themselves in Chicago, IL, each with its own advantages and considerations. A financial advisor will guide you to understand the benefits and drawbacks of each plan and choose the one most suitable for your circumstances. In most cases, your self-employed retirement plan options in Chicago, IL consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that include distinct tax benefits. In a traditional IRA, you can usually deduct your contributions from taxable income, and investment earnings grow tax-deferred, but retirement distributions are taxed as income. In contrast, with Roth IRAs, you contribute from post-tax earnings, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are available to anyone with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that allows self-employed individuals to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a independent business owner, you (the employee) are limited to contributions from the employer role above the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. It's your choice whether to contribute a set monetary value or a percentage of wages to employee accounts. SEP IRAs may be ideal for entrepreneurs facing fluctuating revenue streams. Compared to other retirement options, SEP IRAs are free of expensive setup or ongoing fees.
SEPs function like standard IRAs, where you contribute pre-tax dollars and money withdrawn is subject to income tax.
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
If you’re self-employed, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses without employees or where the only employee is a spouse. Solo 401(k)s operate much like employer-sponsored 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This provides more savings than 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 share the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual 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-employment income, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 if you attain age 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that guarantees a fixed, predetermined benefit to self-employed individuals upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know the precise amount they'll get in retirement. This strategy is ideal for wealthier entrepreneurs who want to save a large amount for retirement and can commit to making sizeable contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income during retirement.
Eligibility: Entrepreneurs running an owner-only business or with a small staff of under five can open an individual defined benefit plan, but it's typically advised for those over 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans tend to be:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 for individuals 50 and older)
- Businesses currently investing 3-4% and are willing to do more
- Companies that have demonstrated consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The cap on contributions must be determined by an actuary using your earnings, age, and retirement objectives. 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 can be an essential partner for entrepreneurs. They bring the skills needed to understand the intricacies of saving for retirement and design 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 assist you in selecting the best options about saving and investing for retirement. A key part of what we do for you includes:
- Assist in selecting a plan that best fits your needs and goals
- Customize the plan to fit you personally even further
- Adopt a written plan as required by IRS rules
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Review and modify your plan when necessary
- Offer continued financial education and guidance to help you navigate your retirement journey
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Chicago, IL: Correct Capital's Process
Chicago, IL business owners who don’t have the time or expertise to oversee their self-employed retirement plan on their own often feel overwhelmed by their options. With Correct Capital, our Chicago, IL financial advisors handle the bulk of your retirement strategy for you, working to make meeting your retirement goals as easy as possible for you. We will guide you in creating your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: In just 20 minutes, a member of our advisor team will assess if we're a good fit for you and your business. This initial call allows us to 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 request information, including your employee count, your current financial situation, and your future objectives. This allows us to put together a custom plan designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll schedule a meeting and review your plan step by step to ensure you understand it and understand how it best correlates to your needs.
- 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 are fiduciary advisors, which means they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Chicago, IL 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 Chicago, IL
Your business isn't "just a business" to you, and your Chicago, IL financial advisors need to offer more than just good financial guidance. Correct Capital takes pride in, 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: everything we recommend 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.
