Self-employed retirement plans in Clayton, MO. The flexibility involved with having your own business in Clayton, MO is a fantastic aspect of being self-employed. But more leeway can come with a lack of security, particularly in in regards to building a retirement plan, you don't have an employer who will set up a plan for you. Only a fraction of self-employed people have retirement plans they can contribute to, but many would be wise to look into what plans are available. In addition to a more comfortable retirement, working with a financial advisor to get started and maintain your self-employed retirement plan in Clayton, MO offers significant tax advantages that can help free up much-needed funds for your business.
Few wealth management and retirement planning firms know what it's like to be self-employed or a small business owner as well as Correct Capital. Our founder's father was a small business owner himself (you can learn more about our story on our website). We have a deep understanding that your business and retirement goals extend far beyond spreadsheets and percentages, and we are committed to providing customized solutions that reflect where you are and where you want to go. Continue reading to discover more about your self-employed retirement plan options in Clayton, MO, or call Correct Capital at 877-930-4015 or contact us online to speak to a small business financial advisor today.
Types of Self-Employed Retirement Plans
There are several retirement savings plans that the self-employed can contribute to, each with its own set of benefits and considerations. A Clayton, MO financial advisor can help you comprehend the advantages and disadvantages of each option and opt for the most suitable one for your circumstances. Generally, your self-employed retirement plan options in Clayton, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are investment accounts that provides individuals with tax advantages to save for retirement. If you deposit to a traditional IRA, contributions 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 contributions are made with after-tax income, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals 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 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. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. If you have employees, you would have to contribute the same amount for them as you do for yourself. You can either contribute either a predetermined fixed dollar amount or a proportion of annual income to employee accounts. SEP IRAs may be a good self-employed retirement plan if your business goes through cycles of high revenue and low revenue. SEP IRAs don't have expensive initial setup or administrative charges other retirement plans do.
SEPs work like traditional IRAs, where payments are made with pre-tax money and withdrawals are taxed at your income at the time of withdrawal.
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 annual contribution limit is decided by a special calculation.
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 greater potential for savings than SEPs or IRAs, however the possibility of greater retirement savings is often counterbalanced by having less investment options available. In an individual 401(k) plan, you can make either traditional or Roth deferrals, which each feature the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up 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 a maximum 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) of 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.
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 provides a a predetermined monthly figure to self-employed individuals after they've left the workforce. In contrast to other types of retirement plans, a defined benefit plan doesn't go up and down based on investment gains, 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 make significant contributions. Contributions are tax deferred and contributions 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 establish 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. 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 do more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit must be determined by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted every year.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Clayton, MO
A financial advisor in Clayton, MO specialized in self-employed retirement plans can be indispensable for self-employed individuals. They have the know-how to help you navigate the intricacies of retirement planning and develop a personalized approach that acts as a roadmap through your financial future. A financial planner will evaluate your financial situation, help you figure out your risk tolerance, and help you make smart decisions about your financial future. 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
- 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 long as you work with us
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Clayton, MO: Correct Capital's Process
Clayton, MO business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become overwhelmed when looking at their options. At Correct Capital, our financial advisors handle the lion's share of your retirement planning on your behalf, and strive to make achieving your retirement goals 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 — It only takes a brief 20-minute call for a member of our advisor team to understand if we're the best firm to help you reach your goals. This brief introduction allows us to understand your needs with no major time investment for you.
- Gather Information — If we seem like a good fit, we'll ask for more info, including the number of employees in your business (if applicable), your current finances, and your retirement goals. This allows us to put together a custom 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 discuss your plan in detail to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so your savings can start growing immediately. As long as we work together, we'll keep you up-to-date with how things are going and adjust your plan to ensure it stays suited to 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 transparent communication and high-quality service to assist you achieve your self-employed retirement goals.
Other services we offer in Clayton, MO include:
Call Correct Capital for Your Clayton, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Clayton, MO financial advisors need to provide you with more than merely sound financial advice. Correct Capital takes pride in getting to know our clients and what makes them and their business tick to deliver personalized self-employed retirement plans. We give all our Clayton, 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 Clayton, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
