Self-employed retirement plans Elk Grove, CA. The independence of being your own boss in Elk Grove, CA is one of the best aspects of working for yourself. Even so, this flexibility can come with potential drawbacks, especially regarding retirement savings, because you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from looking into other possibilities. In addition to achieving a more secure retirement, seeking advice from a financial advisor in Elk Grove, CA to set up your self-employed retirement plan delivers significant tax advantages that enable you to move your business forward.
Few Elk Grove, CA investment consulting and retirement planning firms understand the needs of self-employed individuals as well as Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and Correct Capital have a rich history of assisting business owners in their retirement planning needs. We understand that your business and retirement aspirations go far beyond simple financial figures, and we work tirelessly to offer personalized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Elk Grove, CA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Elk Grove, CA today.
Why Elk Grove, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also deliver tangible benefits today. From flexible contributions to substantial tax savings, partnering with a financial advisor in Elk Grove, CA enables you to design your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) gives you the option to modify how much you save:
- Customizable Contributions: Save extra during successful years and reduce savings when income is lower, so your plan works with your cash flow.
- Roth Options: Choosing a Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw tax-free later—a smart decision if you believe your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to compound.
- State-Specific Incentives: Depending on where you live, you may be eligible for extra credits as a self-employed individual. These state-level incentives can make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement goes beyond just how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Distributing your investments across varied stocks, bonds, and alternatives can help minimize exposure to risk while helping to grow your savings.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net ensures you don’t using your retirement funds during challenging periods and incurring penalties.
Plan for the Future of Your Elk Grove, CA Business
A thoughtful retirement strategy also helps you plan ahead for what’s next with your Elk Grove, CA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s stay in your name and won’t be included in the sale. These accounts ensure the reliable income you’ll need during retirement. It’s important to note that while selling your business results in a capital gain, retirement plan contributions are subject to yearly maximums (e.g., as much as $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you might face when you pass on your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts provide financial security as you make this shift. You can also work with a financial advisor with expertise in succession and retirement planning to minimize tax burdens during the sale.
With the proper savings strategy, you can take control of your financial future, lower your tax bill, and build a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Elk Grove, CA Now?
Time is one of the most important factors in retirement planning. Beginning sooner rather than later not only allows you to build a more substantial retirement fund but also minimizes the stress of catching up later in life. This is why it pays to take action now:
The Cost of Waiting
Delaying your retirement savings could lead to a significant impact on the savings you’ll have when you stop working. The biggest reason is compound interest—the powerful process where your investments earn returns, and those returns, then, earn even more returns. The greater time span your money has to grow, the larger the impact of compounding.
Example: Alex and Taylor are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but puts away $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex puts in $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments invested steadily often create impressive growth. Take a look at this scenario showing the effect of compounding:
- Starting at age 25: If you invest $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, all because of a 10-year delay.
Starting sooner, the lower your annual savings needs each year to meet your retirement goals.
*These calculations are estimates generated with NerdWallet’s Compound Interest Calculator, based on a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. These examples are meant to provide general guidance and cannot predict actual future outcomes. Your individual results may differ depending on factors such as market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for custom recommendations.
Take Control of Your Financial Future
For self-employed individuals in Elk Grove, CA, it might seem easier to put more emphasis on reinvesting in your business over saving for retirement. That said, beginning a plan now allows you to:
- Leverage tax-free future growth or withdrawals without taxes later on.
- Enjoy contribution flexibility that change with your earnings.
- Create a safety net that offers peace of mind, no matter how your business develops.
The sooner you start, the less you’ll have to worry about catching up later in life. Saving for retirement now means taking control of your financial future and giving yourself the opportunity to focus on your dreams—both for your future retirement and your Elk Grove, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for entrepreneurs in Elk Grove, CA, each providing its own pros and cons. A financial advisor can help you understand the benefits and drawbacks of each plan and identify the one ideal for your unique situation. In most cases, your self-employed retirement plan options in Elk Grove, CA consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that include key tax perks. In a conventional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxable. In contrast, Roth IRA contributions from post-tax earnings, but qualified withdrawals in retirement, including earnings, are tax-free. In both types of accounts, withdrawals come without penalties if you are at least 59½.
Eligibility: Unlike plans linked to your job, IRAs, including traditional and Roth options 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 qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that enables those who are self-employed to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) allocate. If you have employees, it's required to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a flat-dollar amount or a percentage of wages to employee accounts. A SEP IRA is a good option for businesses that experience cycles of high revenue and low revenue. Compared to other retirement options, SEP IRAs are free of costly startup or administrative fees.
SEPs function like traditional IRAs, where the contributions are tax-deferred 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: Solo 401(k)s, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan meant for businesses without employees or if the only employee is your spouse. These plans operate much like traditional employer-managed 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the extra savings options can be balanced by more limited investment options. Using a solo 401(k), you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you are allowed to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employment income, up to 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.
- Profit-sharing contributions (as an employer) are limited to 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the employee contributions you made.
The total contribution cannot exceed $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan offers a structured retirement solution that provides a set amount to self-employed individuals upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know the precise amount they'll get in retirement. This plan is recommended for high-earning professionals who aim to accumulate a substantial amount for retirement and can commit to making substantial contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income in retirement.
Eligibility: Any self-employed individual managing a one-person company or with less than five employees may establish an individual defined benefit plan, but it's generally suggested for individuals aged 50+ who make $250,000 or more annually. In most cases, good candidates for defined benefit plans include:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% and are willing to do more
- Organizations showing consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution requires calculation from an actuary based on your income, age, and retirement goals. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Elk Grove, CA for Your Self-Employed Retirement Plan
Working with a financial advisor in Elk Grove, CA specialized in self-employed retirement plans can be an invaluable resource for entrepreneurs. They have the expertise to help navigate the complexities of retirement planning and design a tailored strategy that matches your objectives. An expert in your area will evaluate your financial situation, understand your risk tolerance, and assist you in choosing wisely about saving and investing for retirement. Included in what we do for you includes:
- Help you choose a plan that suits your unique requirements
- Customize the plan to your specific situation even further
- Create a written plan in accordance with IRS guidelines
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Elk Grove, CA: Correct Capital's Process
Entrepreneurs in Elk Grove, CA who aren’t equipped with the time or understanding to oversee their own retirement planning independently can become overwhelmed when faced with their options. Through our team at Correct Capital, our Elk Grove, CA financial advisors manage the lion's share of your retirement planning for you, and strive to ensure meeting your retirement goals as hassle-free as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can help understand if we're a good fit for you and your business. This initial call allows us to learn about your needs with no pressure or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including whether you have employees, your existing financial picture, and your long-term savings targets. This allows us to put together a custom plan that aligns with your goals.
- Review Your Plan: Once we've developed a plan using the information you provide, we'll schedule a meeting and go over your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll put everything in place so you can start saving. Throughout our relationship, we'll check in and review your strategy to ensure it stays suited to your needs.
Our Elk Grove, CA financial advisors and retirement plan consultants are fiduciary advisors, which means they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Elk Grove, CA include:
- 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 Elk Grove, CA
Your business isn't "just a business" to you, and your Elk Grove, CA financial advisors must deliver more than just good financial guidance. With Correct Capital, we focus on building a relationship with our clients and their businesses to deliver tailored self-employed retirement plans. All our clients in Elk Grove, CA benefit from our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To get started on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
