Self-employed retirement plans Detroit, MI. The freedom of owning your own business in Detroit, MI is one of the best aspects of working for yourself. That said, this flexibility often comes with potential drawbacks, particularly in terms of retirement savings, since you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless should consider exploring their options. In addition to achieving a more comfortable retirement, seeking advice from a financial advisor in Detroit, MI to set up your self-employed retirement plan delivers significant tax advantages that allow your business to grow and succeed.
Few Detroit, MI investment consulting and retirement planning firms truly grasp the challenges faced by entrepreneurs quite like 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 Correct Capital have a rich history of supporting entrepreneurs with their retirement planning needs. We know that your business and retirement aspirations aren’t limited to just monetary concerns, and we work tirelessly to offer customized solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Detroit, MI, or reach out to Correct Capital at 877-930-401k or contact us online to speak with a self-employed financial advisor in Detroit, MI today.
Why Detroit, MI Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also offer real benefits today. Offering flexibility in contributions to significant tax savings, partnering with a financial advisor in Detroit, MI helps you customize your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income over time, a plan like a SEP IRA or Solo 401(k) provides the flexibility to adjust how much you save:
- Customizable Contributions: Contribute more during profitable years and scale back when income is lower, so your plan works with your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw your savings tax-free down the road—an advantageous choice if you expect your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans offer significant tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) reduce what you owe in taxes, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to grow.
- State-Specific Incentives: In some states, you might access additional credits as a business owner. These local incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can apply for a credit of up to 50% of the first $2,000 put into a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across different asset classes like stocks and bonds can help minimize exposure to risk while helping to grow your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund prevents you from tapping into your nest egg during tough times and incurring penalties.
Plan for the Future of Your Detroit, MI Business
Preparing for retirement also helps you think through what’s next with your Detroit, MI business:
- Selling Your Business: When selling your business, plans like SEP IRAs or Solo 401(k)s remain yours and are not part of the sale. These savings ensure the steady income you’ll need later on. Keep in mind that while selling a business often leads to a capital gain, retirement plan contributions are subject to yearly maximums (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you’ll owe when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your retirement savings offer financial security as you make this shift. You may also partner with a financial advisor with expertise in succession and retirement planning to minimize tax burdens associated with the transaction.
With the best-fit retirement strategy, you can take control of your financial future, reduce your tax burden, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Detroit, MI Now?
Time remains one of the most crucial assets for building your retirement fund. Starting early not only helps you grow a more substantial retirement fund but also lowers the financial burden of saving aggressively in the future. This is why it pays to take action now:
The Cost of Waiting
Waiting to start your retirement fund may cause a substantial impact on the savings you’ll have when you stop working. The biggest reason is compound interest—the financial principle where your investments grow, and those returns, subsequently, earn even more returns. The greater time span your money has to grow, the larger the effect of this compounding process.
Example: Alex and Taylor are both self-employed professionals. Both of them want to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor waits until age 40 but saves $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently can lead to substantial growth. Consider this example showing the impact of compound interest:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, all because of a 10-year delay.
Saving early, the less you need to save each year to reach your retirement goals.
*The figures provided in this example are based on estimates derived from NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are meant to provide general guidance and cannot predict actual future outcomes. Outcomes may change based on elements like market conditions, fees, and individual circumstances. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Detroit, MI, it can be tempting to put more emphasis on reinvesting in your business instead of saving for retirement. Even so, initiating a plan now gives you the chance to:
- Leverage growth that is tax-deferred or tax-free withdrawals down the road.
- Enjoy flexible contributions that adapt to your cash flow.
- Build a safety net that provides security, no matter how your business changes.
Starting early, the less you’ll be required to worry about catching up later in life. Building your retirement savings today means gaining control over your financial future and creating for yourself the opportunity to focus on your objectives—both for your future retirement and your Detroit, MI business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for entrepreneurs in Detroit, MI, each with its own advantages and considerations. A financial advisor is available to help you understand the pros and cons of each plan and determine the one ideal for your circumstances. Typically, 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 include distinct tax benefits. In a traditional IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but retirement distributions are taxed as income. In contrast, with Roth IRAs, you contribute from post-tax earnings, but eligible distributions during retirement, including earnings, are not taxed. In both cases, withdrawals don’t incur penalties if you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, both traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA offers a way to save for retirement that allows entrepreneurs to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions above 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 fixed dollar figure or a percentage of wages to employee accounts. This type of plan is a good option for entrepreneurs facing periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs function like conventional IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Any employer, including the self-employed can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the allowable contribution 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 businesses without employees or where the only employee is a spouse. These plans function similarly to standard 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This offers more savings versus SEPs or IRAs; however, the extra savings options may be offset by more restricted investment choices. With this type of 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 are eligible to open and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you are allowed to make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employment income, 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 individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your net earnings from self-employment, which is your net profit minus half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 for those aged 50 and older (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans represents a type of retirement plan that delivers a set amount to entrepreneurs upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but enables participants to determine the precise amount they'll have in retirement. This plan is best suited for higher-income entrepreneurs who want to save a large amount for retirement and are willing to make larger deposits. Contributions are tax deferred, and withdrawals are taxed as income upon retirement.
Eligibility: Entrepreneurs running an owner-only business or with a small staff of under five are eligible to open an individual defined benefit plan, but it's most commonly advised for people above age 50 who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% with plans to contribute more
- Businesses with proven consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The contribution limit requires calculation from an actuary based on your financial situation, age, and savings targets. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Detroit, MI for Your Self-Employed Retirement Plan
A financial advisor in Detroit, MI focused on self-employed retirement strategies can be an important asset for self-employed individuals. They have the expertise to help understand the intricacies of saving for retirement and design a personalized approach that reflects your aspirations. A financial advisor in Detroit, MI will review your finances, understand your risk tolerance, and guide you in choosing wisely about saving and investing for retirement. A key part of what we do for you involves:
- Assist in selecting a plan that suits your unique requirements
- Further adapt the plan to fit you personally even further
- Create a written plan 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 to keep it aligned with your goals
- Provide ongoing education and advice throughout your retirement planning process
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Detroit, MI: Correct Capital's Process
Entrepreneurs in Detroit, MI who don’t have the time or expertise to manage their retirement savings strategy independently often feel overwhelmed by their options. Through our team at Correct Capital, our Detroit, MI financial advisors take on the bulk of your retirement strategy for you, and strive to ensure meeting your retirement goals as straightforward as possible for you. We will guide you in creating your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team will assess if we're suited to your needs for you and your business. This brief introduction helps us understand what you're looking for with no pressure or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including whether you have employees, your current financial situation, and your retirement goals. This allows us to put together a custom plan designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll meet with you and discuss your plan in detail to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: After we agree on your plan, we'll implement the necessary steps so you can initiate your savings journey. 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 committed by law and ethics to act in your best interest.
Other financial advisory services we offer in Detroit, MI include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Detroit, MI
To you, your business is more than "just a business", and your Detroit, MI 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 provide personalized self-employed retirement plans. All our clients in Detroit, MI benefit from our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
