Self-employed retirement plans Cleveland, OH. The flexibility of being your own boss in Cleveland, OH is one of the best aspects of having a self-directed career. However, this flexibility sometimes brings with certain challenges, especially when it comes to building your retirement fund, since you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off exploring their options. In addition to having a financially stable retirement, working with a financial advisor in Cleveland, OH to establish your self-employed retirement plan can provide significant tax advantages that allow both you and your business to thrive.
Few Cleveland, OH investment consulting and retirement planning firms truly grasp the challenges faced by small business owners better than Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (read more of our story here), and we have a rich history of assisting business owners in their retirement planning needs. We recognize that your business and retirement aspirations aren’t limited to basic numbers, and we strive to create tailored solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in Cleveland, OH, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a self-employed financial advisor in Cleveland, OH today.
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Why Cleveland, OH Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also offer real benefits today. Offering flexibility in contributions to significant tax savings, consulting a financial advisor in Cleveland, OH enables you to design your retirement plan to align with your unique financial situation.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) provides the flexibility to modify how much you save:
- Customizable Contributions: Save extra during successful years and reduce savings when income is lower, so your plan fits 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—a smart decision if you expect your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA lower your taxable income, helping you keep more of your earnings.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to accumulate.
- State-Specific Incentives: In some states, you may be eligible for extra deductions as a sole proprietor. These local incentives can make these plans even more valuable.
- 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
Planning for a safe retirement isn’t only about how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and alternatives serves to mitigate financial risk while still growing your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a dedicated business safety net ensures you don’t tapping into your nest egg during challenging periods and incurring penalties.
Plan for the Future of Your Cleveland, OH Business
Preparing for retirement also helps you think through what’s next with your Cleveland, OH business:
- Selling Your Business: For those considering a sale, plans like SEP IRAs or Solo 401(k)s remain yours and don’t transfer with the business. These accounts offer the financial stability you’ll need in the future. Keep in mind that while selling a business often leads to a capital gain, deposits into these plans are capped at annual limits (e.g., a maximum of $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you might face when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement accounts offer the funds you need as you make this shift. You can also seek advice from a financial advisor with expertise in succession and retirement planning to reduce taxes during the sale.
With the right retirement plan, you can take control of your financial future, lower your tax bill, and establish a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Cleveland, OH Now?
Time remains one of the most important factors for building your retirement fund. Starting early not only lets you accumulate a bigger financial cushion but also lowers the pressure of playing catch-up as you get older. This is why it is beneficial to start now:
The Cost of Waiting
Putting off saving for retirement could lead to a significant impact on the savings you’ll have when you stop working. The primary reason is compound interest—the powerful process where your investments grow, and those returns, subsequently, generate even more returns. The greater time span your money has to grow, the more significant the benefit of this growth.
Example: Taylor and Alex are both entrepreneurs. They each aim 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 make up for lost time.
By age 65, using a projected 7% annual return:
- Alex puts in $180,000 and accumulates $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time can lead to impressive growth. Here’s a simple scenario showing the effect of compounding:
- Starting at age 25: If you invest $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: Investing the same $200 per month yields only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*The numbers shown in this scenario are estimates derived from NerdWallet’s Compound Interest Calculator, based on a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are for illustrative purposes only and cannot predict actual future outcomes. Actual results may vary based on elements like market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
If you’re self-employed in Cleveland, OH, it is often the case that you put more emphasis on reinvesting in your business over saving for retirement. Even so, beginning a plan now enables you to:
- Take advantage of growth that is tax-deferred or withdrawals without taxes in the future.
- Benefit from contribution flexibility that adapt to your income.
- Create a safety net that ensures stability, no matter how your business evolves.
Starting early, the less you’ll be required to worry about catching up later in life. Taking steps toward your retirement goals today means gaining control over your financial future and allowing yourself the freedom to focus on your goals—both for your golden years and your Cleveland, OH business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for self-employed individuals in Cleveland, OH, each offering its own pros and cons. A financial advisor is available to help you evaluate the benefits and drawbacks of each plan and choose the one ideal for your needs. In most cases, your self-employed retirement plan options in Cleveland, OH consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that provide key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but retirement distributions are taxable. In contrast, Roth IRA contributions from post-tax earnings, 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: Unlike 401(k)s, which are employer-sponsored, traditional and Roth IRAs are open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that enables those who are self-employed to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) have designated. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a fixed dollar figure or a percentage of wages to employee accounts. SEP IRAs may be ideal for companies with cycles of high revenue and low revenue. Unlike other plans, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs function like standard IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
Eligibility: Any employer, including the self-employed can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses with no employees or where the only employee is a spouse. Solo 401(k)s operate much like standard 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This provides more savings than SEPs or IRAs; however, the increased savings potential can be balanced by more constrained investment avenues. 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: Only business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you can make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employed earnings, subject to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your net self-employment income, which is your net profit minus half of your self-employment tax and the employee contributions you made.
Total contributions are capped at $70,000, or $77,500 for individuals aged 50+ (for 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 set amount to entrepreneurs upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but enables participants to determine the precise amount they'll get in retirement. This strategy is best suited for high-earning entrepreneurs who aim to accumulate a large amount for retirement and are prepared to contribute larger deposits. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income upon retirement.
Eligibility: Entrepreneurs operating a solo business or with a small staff of under five may establish an individual defined benefit plan, but it's typically advised for those over 50 who make $250,000 or more annually. Typically, good candidates for defined benefit plans include:
- Partners or owners who desire to contribute more than $70,000 (or $77,500 for individuals 50 and older)
- Companies already contributing 3-4% with plans to contribute more
- Businesses with proven consistent profit patterns
- Entrepreneurs over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions must be determined by an actuary using your financial situation, age, and savings targets. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Cleveland, OH for Your Self-Employed Retirement Plan
A financial advisor in Cleveland, OH focused on self-employed retirement strategies can be an essential partner for self-employed individuals. They have the expertise to help guide you through the challenges of retirement planning and design a personalized approach that matches your objectives. An expert in your area will review your finances, understand your risk tolerance, and assist you in making informed decisions about saving and investing for retirement. Part of what we do for you includes:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Customize the plan to your needs even further
- Formalize a plan in writing that complies with IRS regulations
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Review and modify your plan when necessary
- Provide ongoing education and advice throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Cleveland, OH: Correct Capital's Process
Cleveland, OH business owners who aren’t equipped with the time or understanding to oversee their retirement savings strategy independently often feel overwhelmed by their available plans. At Correct Capital, our Cleveland, OH financial advisors manage the majority of your retirement planning for you, working to make meeting your retirement goals 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 our services align for you and your business. This initial call helps us get a sense of your goals with zero commitment or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll gather information, including your employee count, your current financial situation, and your long-term savings targets. This allows us to put together a custom plan that aligns with your goals.
- Review Your Plan: When we finalize a plan from the information you provide, we'll schedule a meeting and go over your plan in detail to help you fully grasp 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 initiate your savings journey. Throughout our relationship, we'll meet with you and track your progress to make sure it remains aligned with your goals.
Our Cleveland, OH financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Cleveland, OH 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 Cleveland, OH
You don't see your business as "just a business", and your Cleveland, OH financial advisors should provide more than just good financial guidance. With Correct Capital, we take the time to get to know our clients and their businesses to deliver customized self-employed retirement plans. We offer all our Cleveland, OH 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, contact Correct Capital now at 877-930-401k or contact us online.
