Self-employed retirement plans in Cottleville, MO. The freedom of having your own business in Cottleville, MO is a wonderful advantage to being self-employed. But that freedom can come with uncertainty, particularly in when it comes to saving for retirement, as you don't have access to any employer plans. Only a fraction of self-employed people have a workplace retirement plan, but many would be better off exploring their options. In addition to setting you up for the retirement of your dreams, working with a financial advisor to get started and maintain your self-employed retirement plan in Cottleville, MO offers tax benefits that can help you improve your bottom line.
Not many wealth management and retirement planning firms will understand the needs of the self-employed and small business owners as well as Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can discover more about our story on our website). We have a deep understanding that your business and retirement aspirations transcend mere monetary figures, and we are devoted to providing personalized plans that fit your goals. Read on to learn more about your self-employed retirement plan options in Cottleville, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team now.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings options available for self-employed individuals, and which is best for you depends on your unique situation. A Cottleville, MO financial advisor can help you understand the pros and cons of each option and select that works best for you. Typically, your self-employed retirement plan options in Cottleville, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that offer specific tax advantages. If you deposit to a traditional IRA, deposits are typically tax-deductible, and any gains on investments grow tax-deferred, but withdrawals in retirement are taxed as regular income. On the other hand, Roth IRA contributions are made with after-tax income, but qualified distributions in retirement, including earnings, are tax-free. In both accounts, distributions are penalty-free 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 percentage of of their annual income from self-employment. Since you are self-employed, you (the employee) have a contribution limit of no more than the 25% already contributed by you (the employer). If you have employees, you must contribute an equal amount to their plans. You may choose to contribute either a predetermined fixed dollar amount or a proportion of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan if your business goes through fluctuating income periods. 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 as income.
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 maximum amount you can contribute in a given year 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 businesses with no employees or who only employ a spouse. Solo 401(k)s work in the same same way as employer-sponsored 401(k) plans, and you can make contributions as both an employer or employee with pre-tax money. This offers more savings than SEPs or IRAs, however the additional opportunities for saving are often counteracted by having less investment options available. In a solo 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 self-employed individuals and their spouses can establish 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) which cannot exceed 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 after they've left the workforce. In contrast to the defined contribution plans mentioned above, a defined benefit plan doesn't go up and down based on 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 establish an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who desire 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 want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit must be decided by an actuary who calculates for your income, age, and retirement goals. Contribution limits change annually.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Cottleville, MO
A financial advisor in Cottleville, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the experience to help you understand the intricacies of retirement planning and implement a personalized approach that gets you where you want to go. A financial planner will look at your financial situation, understand your risk tolerance, and help you make sound decisions about your financial future. Part of what we do for you includes:
- Help you choose 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 guidelines
- 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 support as you continue on the road to retirement
- Increase your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Cottleville, MO: Correct Capital's Process
Cottleville, MO business owners without the time, interest, or knowledge to handle their self-employed retirement plan themselves can become overwhelmed with the different plans available to them. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning on your behalf, and attempt to make meeting the golden years of your dreams as simple as possible for you. We can help you get set up with 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 understand if we're a good fit for you and your business. This short introduction lets us get a feel for what you're looking for with no major time investment on your part.
- Gather Information — If we both decide to move forward, we'll request more info, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to have. This allows us to put together a custom 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 discuss the specifics of your plan to ensure you understand it.
- Implementation and Monitoring — Once we've started to move forward, we'll put everything in place so you can start saving. Throughout our relationship, we'll keep you up-to-date with how things are going and monitor your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and ethically bound to do what's in your best interest. We pride ourselves in providing transparent communication and excellent service to assist you attain your self-employed retirement goals.
Other services we offer in Cottleville, MO include:
Call Correct Capital for Your Cottleville, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Cottleville, MO financial advisors need to offer more than just sage financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver customized self-employed retirement plans. We give all our Cottleville, MO clients the same 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 Cottleville, MO, speak to a financial advisor today at 877-930-4015 or contact us online.
