Self-employed retirement plans Detroit, MI. The flexibility of being your own boss in Detroit, MI offers many benefits of being self-employed. That said, this independence can come with a lack of security, particularly in terms of planning for retirement, as 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 could benefit from exploring their options. In addition to achieving a more secure retirement, working with a financial advisor in Detroit, MI to set up your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Detroit, MI investment consulting and retirement planning firms are as attuned to the requirements of small business owners quite like Correct Capital. The father of our founder was a small business owner himself (check out our story here), and we are deeply experienced in assisting business owners in their retirement planning needs. We recognize that your business and retirement aspirations extend well past basic numbers, and we strive to create tailored solutions aligned with your vision. Continue exploring to find out about your self-employed retirement plan options in Detroit, MI, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a small business financial advisor in Detroit, MI today.
Why Detroit, MI Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also offer immediate benefits today. With customizable contribution options to substantial tax savings, partnering with a financial advisor in Detroit, MI helps you create your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) provides the freedom to tailor how much you save:
- Customizable Contributions: Contribute more during successful years and reduce savings when income is lower, so your plan fits your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw your savings tax-free down the road—a wise move if you expect your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, allowing you to keep more of your income.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to grow.
- State-Specific Incentives: Depending on where you live, you may be eligible for extra credits as a sole proprietor. These local incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax 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 linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of stocks, bonds, and alternatives is a smart way to reduce risk while still growing your savings.
- Emergency Back-Up: Pairing your retirement plan with a dedicated business safety net ensures you don’t tapping into your nest egg during financial hardships and risking extra costs.
Plan for the Future of Your Detroit, MI Business
Retirement planning enables you to prepare for what’s next with your Detroit, MI business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s stay in your name and won’t be included in the sale. These accounts offer the steady income you’ll need later on. Keep in mind that while selling a business often leads to a capital gain, deposits into these plans are restricted by contribution limits (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, factoring in catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions helps lower the taxes you are required to pay when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement accounts ensure the funds you need through the transition. You can also work with a financial advisor who specializes in succession planning and retirement accounts to reduce taxes during the sale.
With the right retirement plan, you can take control of your financial future, cut down your tax obligations, and build a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Detroit, MI Now?
Time is one of the most valuable resources when it comes to saving for retirement. Getting a head start not only lets you accumulate a larger nest egg but also lowers the financial burden of playing catch-up as you get older. Here’s why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings can have a major impact on the savings you’ll have when you stop working. The main reason is compound interest—the financial principle where your investments earn returns, and those returns, then, earn even more returns. The more time your money has to grow, the larger the effect of this growth.
Example: Two individuals, Alex and Taylor are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor waits until age 40 but contributes $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time can lead to substantial growth. Here’s a simple scenario showing the impact of compound interest:
- Starting at age 25: By investing $200 per month in a retirement plan with an expected yearly growth rate 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 gap of over $260,000, simply due to a 10-year delay.
Saving early, the less you need to save each year to meet your retirement goals.
*The figures provided in this example are estimates derived from NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are meant to provide general guidance and do not guarantee future performance. Outcomes may change depending on elements like market conditions, fees, and personal factors. Always consult a financial advisor for custom recommendations.
Take Control of Your Financial Future
For self-employed individuals in Detroit, MI, it is often the case that you prioritize reinvesting in your business rather than saving for retirement. That said, initiating a plan now enables you to:
- Take advantage of tax-free future growth or withdrawals without taxes down the road.
- Enjoy adjustable savings that change with your earnings.
- Build a long-term safety measure that provides security, no matter how your business develops.
Getting started now, the less you’ll need to worry about catching up later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the opportunity to focus on your goals—both for your future retirement and your Detroit, MI business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for entrepreneurs in Detroit, MI, each with its own benefits and trade-offs. A financial advisor will guide you to learn about the benefits and drawbacks of each choice and determine the one ideal for your unique situation. In most cases, your self-employed retirement plan options in Detroit, MI include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that offer distinct tax benefits. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but withdrawals in retirement are subject to income tax. In contrast, Roth IRA contributions using income already taxed, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals 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, both traditional and Roth IRAs are available to anyone with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA offers a way to save for retirement that allows those who are self-employed to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role beyond 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. You have the flexibility to contribute a set monetary value or a percentage of wages to employee accounts. This type of plan is a good option for entrepreneurs facing fluctuating revenue streams. In contrast to some alternatives, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs work like standard IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can open 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), also called an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan designed for companies that have no employees or when the sole employee is your spouse. These plans function similarly to traditional employer-managed 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the increased savings potential may be offset by more limited investment options. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you can make two types of contributions:
- Deferrals as an employee of up to 100% of your earned income from self-employment, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you're over 50, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your adjusted self-employment income, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that delivers a set amount to entrepreneurs upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but lets individuals clearly understand exactly how much they'll receive in retirement. This strategy is ideal for high-earning professionals who aim to accumulate a substantial amount for retirement and are prepared to contribute substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income in retirement.
Eligibility: Self-employed professionals operating a solo business or with less than five employees are eligible to open an individual defined benefit plan, but it's generally recommended for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Companies that have demonstrated consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The contribution limit must be determined by an actuary based on your financial situation, age, and savings targets. Allowable contributions change annually.
The Importance of a Financial Advisor in Detroit, MI for Your Self-Employed Retirement Plan
A financial advisor in Detroit, MI experienced with retirement plans for the self-employed can be an essential partner for those working for themselves. They offer the knowledge to assist navigate the complexities of retirement planning and design a customized plan that reflects your aspirations. A financial advisor in Detroit, MI will assess where you stand financially, determine how much risk you’re comfortable with, and help you in making informed decisions about saving and investing for retirement. Included in what we do for you involves:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Further adapt the plan to your specific situation even further
- Adopt a written plan that complies with IRS regulations
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Review and modify your plan when necessary
- Provide ongoing education and advice to help you navigate your retirement journey
- Maximize what you receive in retirement by maximizing your social security benefits
Self-Employed Retirement Plans in Detroit, MI: Correct Capital's Process
Self-employed individuals in Detroit, MI who aren’t equipped with the time or understanding to manage their self-employed retirement plan independently often feel overwhelmed by their choices. Through our team at Correct Capital, our Detroit, MI financial advisors take on the lion's share of your savings plan setup for you, to help make meeting your financial objectives as easy as possible for you. We can help you get set up your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team will assess if our services align for you and your business. This initial call allows us to understand what you're looking for with no pressure or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including how many employees you have (if any), your existing financial picture, and your long-term savings targets. This enables us to craft a custom plan suited specifically for your needs.
- Review Your Plan: After we put together a plan from the information you provide, we'll meet with you and review your plan in detail to help you fully grasp it and explain its fit to your circumstances.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can begin contributing. Over the course of our partnership, we'll meet with you and monitor your plan to keep it tailored to your evolving circumstances.
Our Detroit, MI financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Detroit, MI include:
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 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 Detroit, MI
Your business isn't "just a business" to you, and your Detroit, MI financial advisors need to offer more than just good financial guidance. With Correct Capital, we make it a priority to understand our clients and their businesses to create personalized self-employed retirement plans. We offer all our Detroit, MI clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To begin on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
