Self-employed retirement plans in Edwardsville, IL. The freedom of having your own business in Edwardsville, IL is a fantastic aspect of working for yourself. But increased leeway can come with limited stability, especially in when it comes to saving for retirement, employer-sponsored plans aren't an option. 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 setting you up for the golden years of your dreams, working with a financial advisor to get started and maintain your self-employed retirement plan in Edwardsville, IL offers favorable tax incentives that can help free up much-needed funds for your business.
Only a handful of wealth management and retirement planning firms know what it's like to be self-employed or a small business owner more than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can discover more about our story on our website). We know that your business and retirement goals extend far beyond just profit, and we are devoted to offering personalized plans that fit your goals. Continue reading to read more about your self-employed retirement plan options in Edwardsville, IL, or call Correct Capital at 314-930-401(k) or contact us online to speak to a member of our advisory team today.
What Self-Employed Retirement Plans Are There?
There are many retirement savings plans available for self-employed individuals, each with its own set of advantages and considerations. A Edwardsville, IL financial advisor can help you understand the benefits and drawbacks of each option and choose that helps both your short- and long-term goals. Typically, your self-employed retirement plan options in Edwardsville, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that provides individuals with tax advantages to save for retirement. In 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 deposits are made with after-tax income, but you pay no taxes on withdrawals or investment gains. In both a traditional an a Roth IRA, distributions are penalty-free as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through employment, traditional and Roth IRAs can be set up by 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 net earnings from self-employment. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. If you have employees, they must receive the same amount you do. 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 experiences fluctuating income periods. SEP IRAs don't have the high upfront costs or administrative expenses often associated with other retirement plans.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and distributions are taxed at your income at the time of distribution.
Eligibility: Any employer, including the self-employed, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
For self-employed people, the amount eligible to be contributed is decided by a special calculation.
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 whose only employee is a spouse. Solo 401(k)s function similarly to 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 additional opportunities for saving are often counteracted by more limited investment options. 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 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 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 up to 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 offers a an assured benefit to self-employed individuals upon retirement. In contrast to the defined contribution plans mentioned above, a defined benefit plan doesn't go up and down 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 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 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 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 based on your income, age, and retirement goals. Contribution limits are adjusted each year.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Edwardsville, IL
A financial advisor in Edwardsville, IL specialized in self-employed retirement plans can be indispensable for self-employed individuals. They have the expertise to help you understand the intricacies of retirement planning and develop a personalized approach that acts as a roadmap through your financial future. A financial planner will look at your financial situation, understand your risk tolerance, and help you make smart decisions about saving and investing for retirement. 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 as you continue on the road to retirement
- Maximize your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Edwardsville, IL: Correct Capital's Process
Edwardsville, IL business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become overwhelmed when looking at their options. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning for you, and endeavor to make meeting your retirement goals as simple as possible for you. We can help you get set up with your self-employed retirement plan in four simple steps:
- 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 what you're looking for with no major time investment on your part.
- Gather Information — If we seem like a good fit, we'll ask for information, including how many employees you have (if any), your current finances, and what kind of retirement you want to live. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and discuss your plan in detail to ensure it's what you were looking for.
- 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 so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and morally bound to do what's best for you and only you. We pride ourselves in providing transparent communication and high-quality service to assist you achieve your self-employed retirement goals.
Other services we offer in Edwardsville, IL include:
- 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
- Retirement Calculator
- Retirement Planning
Call Correct Capital for Your Edwardsville, IL Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your Edwardsville, IL financial advisors need to provide you with more than simply 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 offer all our Edwardsville, 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 Edwardsville, IL, call Correct Capital today at 314-930-401(k) or fill out our online form.