Self-employed retirement plans in Cottleville, MO. The freedom of running your own business in Cottleville, MO is a wonderful advantage to working for yourself. But more leeway can be accompanied by limited stability, particularly in terms of 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 wise to look into what plans are available. In addition to a more comfortable retirement, partnering with a financial advisor to get started and maintain your self-employed retirement plan in Cottleville, MO offers significant tax advantages that can help you improve your bottom line.
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. In fact, we were inspired by a self-employed individual, our founder's father (you can read more about our story here). We have a deep understanding that your business and retirement goals go beyond mere monetary figures, and we are dedicated to offering personalized plans that reflect where you are and where you want to go. Continue reading to learn more about your self-employed retirement plan options in Cottleville, MO, or call Correct Capital at 314-930-401(k) or contact us online to speak to a small business financial advisor today.
Types of Self-Employed Retirement Plans
There are several retirement savings options that the self-employed can contribute to, and which is best for you depends on your unique situation. A Cottleville, MO financial advisor can help you understand the advantages and disadvantages of each option and select that helps both your short- and long-term goals. 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. In a traditional IRA, deposits are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are taxed as if it were income. On the other hand, Roth IRA payments are made with money you've already paid taxes on, but qualified distributions in retirement, including earnings, are tax-free. In both accounts, 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, 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 annual income 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, 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 a suitable self-employed retirement plan if your business goes through fluctuating income periods. SEP IRAs don't have expensive initial setup or administrative charges often associated with other retirement plans.
SEPs work like traditional IRAs, where payments are made with pre-tax money and withdrawals are taxed at your income at the time of distribution.
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
- $66,000
For the self-employed individual, the amount eligible to be contributed is based on 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 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 greater potential for savings than some other retirement savings plans, however the additional opportunities for saving are often counterbalanced by having less investment options available. In a one-participant 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 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 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 predetermined monthly figure to self-employed individuals once they've retired. In contrast to the defined contribution plans mentioned above, a defined benefit plan doesn't oscillate because of investment gains, but allows self-employed individuals 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 substantial portion for retirement and want to add substantial contributions. Contributions are tax deferred and contributions are taxed as income 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 well into the six figures. Typically, good candidates for defined benefit plans are:
- Partners or owners who want to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute 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 decided by an actuary based on your income, age, and retirement goals. Contribution limits change every year.
How a Financial Advisor Can Help Guide 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 expertise to help you understand the intricacies of retirement planning and implement a customized plan that acts as a roadmap through your financial future. A financial advisor will look at where your finances currently are, understand 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
- Tailor 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 support as long as you work with us
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Cottleville, MO: Correct Capital's Process
Cottleville, MO business owners who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become burdened when looking at their options. At Correct Capital, our financial advisors handle the lion's share of your retirement planning for you, and strive to make achieving your business and retirement goals as easy as we possibly can. 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 know 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 request information, including how many employees you have (if any), 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 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. As long as we work together, we'll meet with you 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 ethical obligation to do what's in your best interest. We pride ourselves in providing straightforward communication and top-notch service to help you reach your self-employed retirement goals.
Other services we offer in Cottleville, MO include:
- Succession Planning
- 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
Call Correct Capital for Your Cottleville, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Cottleville, MO financial advisors need to provide you with more than simply sound financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver tailored self-employed retirement plans. We offer all our Cottleville, 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 Cottleville, MO, call Correct Capital today at 314-930-401(k) or contact us online.
