Self-employed retirement plans in Clayton, MO. The freedom of having your own business in Clayton, MO is one of the great things about being self-employed. But that freedom can be accompanied by uncertainty, particularly in terms of building a retirement plan, as you don't have access to any employer plans. Barely more than 10% of self-employed individuals have retirement plans they can contribute to, but many would be better off exploring their options. In addition to setting you up for the golden years of your dreams, working with a financial advisor to set up your self-employed retirement plan in Clayton, MO offers favorable tax incentives that can help boost you and your business towards success.
Only a handful of financial advisory 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 here). We have a deep understanding that your business and retirement aspirations transcend just profit, and we are devoted to providing tailored solutions that fit where you are and where you want to go. Continue reading to read more about your self-employed retirement plan options in Clayton, MO, or call Correct Capital at 314-930-401(k) or fill out our online form to speak to a small business financial advisor now.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings plans available for self-employed individuals, each with its own set of benefits and considerations. A Clayton, MO financial advisor can help you understand the pros and cons of each option and choose that helps both your short- and long-term goals. Generally, your self-employed retirement plan options in Clayton, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are long-term savings plans that offer specific tax advantages. In a traditional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but distributions in retirement are taxed as if it were income. In contrast, Roth IRA payments are made with after-tax income, but you pay no taxes on withdrawals or investment gains. In both a traditional an a Roth IRA, withdrawals are penalty-free if 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. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 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 wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan if your business goes through periods of variable income. SEP IRAs don't have the costly startup or administrative fees often associated with other retirement plans.
SEPs work like traditional IRAs, where payments are made with money you've yet to pay taxes on and withdrawals are taxed as income.
Eligibility: Self-employed individuals and any employer, can set up a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
For the self-employed individual, the annual contribution limit is decided by a unique calculation.
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 who only employ a spouse. Solo 401(k)s work similarly to employer-sponsored 401(k) plans, and you can make contributions as an employee and on your own behalf as the employer. This offers increased savings opportunities than SEPs or IRAs, however the additional opportunities for saving are often counterbalanced by having less investment options available. In a solo 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only self-employed individuals and their spouses have access to solo 401(k)s.
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.
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 fixed 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 gains, but allows self-employed people to have an exact dollar figure as their income in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a large amount for retirement and want 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 with no employees besides the owner or has less than five employees can establish an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn at least $250,000 a year. 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 do 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 determined by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Clayton, MO
A financial advisor in Clayton, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the knowledge to help you navigate the intricacies of retirement planning and create a customized plan that acts as a roadmap through your financial future. A financial advisor will evaluate your financial situation, help you figure out your risk tolerance, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Adopt a written plan in accordance with 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 guidance as you continue on the road to retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Clayton, MO: Correct Capital's Process
Clayton, MO business owners without the time, desire, or knowledge to handle their self-employed retirement plan themselves can become burdened with the different plans available to them. At Correct Capital, our financial advisors handle the lion's share of your retirement planning for you, and strive to make achieving the golden years of your dreams as simple as we possibly can. We can help you get set up with your self-employed retirement plan in four simple steps:
- Schedule a Call — We only need a brief 20-minute call for a member of our advisor team to know if we're the best firm to help you reach your goals. This short introduction allows us to get a feel for what you're looking for with no major time investment on your part.
- Gather Information — If we seem like a good fit, we'll request information, including the number of employees in your business (if applicable), your current finances, and what kind of retirement you want to live. 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 go over your plan in detail to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've enacted 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 so it stays consistent with your needs.
Our financial advisors 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 top-notch service to help you attain your self-employed retirement goals.
Other services we offer in Clayton, MO include:
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
Call Correct Capital for Your Clayton, MO Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your Clayton, MO financial advisors need to provide you with more than merely wise financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver personalized self-employed retirement plans. We offer all our Clayton, MO clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Clayton, MO, call Correct Capital today at 314-930-401(k) or contact us online.