Self-employed retirement plans in Columbia, IL. The flexibility involved with running your own business in Columbia, IL is a wonderful advantage to working for yourself. But increased leeway can come with a lack of security, particularly in when it comes to saving for retirement, you don't have an employer who will set up a plan for you. Barely more than 10% of self-employed people have a workplace retirement plan, but many would be better off exploring what plans are available. In addition to setting you up for the retirement of your dreams, partnering with a financial advisor to set up your self-employed retirement plan in Columbia, IL offers significant tax advantages that can help boost you and your business towards success.
Few financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner than Correct Capital. Our founder's father was a small business owner himself (you can learn more about our story here). We know that your business and retirement goals extend far beyond mere monetary figures, and we are devoted to offering personalized solutions that reflect your goals. Read on to read more about your self-employed retirement plan options in Columbia, IL, or call Correct Capital at 877-930-4015 or contact us online to speak to a member of our advisory team now.
What Self-Employed Retirement Plans Are There?
There are many retirement savings options that the self-employed can establish, and which is best for you depends on your unique situation. A Columbia, IL financial advisor can help you comprehend the pros and cons of each option and select that helps both your short- and long-term goals. Generally, your self-employed retirement plan options in Columbia, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that allows you to set aside money for the future, with special tax considerations. In a traditional IRA, contributions are deducted from your taxable income, and any gains on investments grow tax-deferred, but withdrawals in retirement are taxed as regular income. In contrast, Roth IRA contributions are made with after-tax income, but you pay no taxes on withdrawals or earnings. In both a traditional an a Roth IRA, distributions 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, the maximum yearly contributions 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 portion of of their net earnings from self-employment. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, they must receive the same amount you do. You can either contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that go through cycles of high revenue and low revenue. SEP IRAs don't have the costly startup or administrative fees often associated with other retirement plans.
SEPs work like traditional IRAs, where deposits are made with pre-tax money and distributions are taxed at your income at the time of withdrawal.
Eligibility: Self-employed individuals and any employer, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For self-employed people, the annual contribution limit is decided by a specific formula.
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 sole proprietors or those whose only employee is a spouse. Solo 401(k)s work about the same as employer-sponsored 401(k) plans, and you can add funds as both an employer or employee with pre-tax money. This offers increased savings opportunities than some other retirement savings plans, however the possibility of greater retirement savings is often counteracted by more limited investment options. In an individual 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax advantages as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses have access to individual 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 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 a maximum of 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 provides a a fixed monthly figure to self-employed individuals once they've retired. In contrast to other types of retirement plans, a defined benefit plan doesn't go up and down because of investment returns, but allows self-employed people 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 want to add substantial contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can open 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 want to do more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is calculated by an actuary who calculates for your income, age, and retirement goals. Contribution limits are adjusted annually.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Columbia, IL
A financial advisor in Columbia, IL specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the expertise to help you navigate the complexities of retirement planning and implement a customized plan that acts as a roadmap through your financial future. A financial planner will evaluate where your finances currently are, help you figure out your risk tolerance, and guide you in making informed decisions for yourself, both as employer and future retiree. 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 rules
- 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 into and through retirement
- Increase your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Columbia, IL: Correct Capital's Process
Columbia, IL business owners who don't have the time, inclination, or knowledge to handle their self-employed retirement plan themselves can become stressed with the different plans available to them. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work on your behalf, and endeavor to make achieving your retirement goals as easy as we possibly can. We can help you establish and maintain your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need 20 minutes for one of our advisors to know if we're suitable for you and your business. This short introduction lets us get a feel for your needs with no obligation on your part.
- Gather Information — If we both decide to move forward, we'll ask for more info, including how many employees you have (if any), your current finances, and your retirement goals. This allows us to put together a personalized plan suited specifically for your needs.
- 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 started to move forward, we'll put everything in place so you can start saving. Throughout your time working with us, we'll meet with you and monitor your plan so it stays consistent with your needs.
Our financial advisors and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's best for you and only you. We are proud to provide clear communication and top-notch service to help you achieve your self-employed retirement goals.
Other services we offer in Columbia, IL include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
Call Correct Capital for Your Columbia, IL Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Columbia, IL financial advisors need to provide you with more than merely wise financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver personalized self-employed retirement plans. We offer all our Columbia, IL clients the same 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 Columbia, IL, speak to a financial advisor today at 877-930-4015 or contact us through our website.
