Self-employed retirement plans Elk Grove, CA. The freedom of owning your own business in Elk Grove, CA is one of the greatest advantages of having a self-directed career. However, this flexibility can come with potential drawbacks, notably regarding planning for retirement, as you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off looking into other possibilities. In addition to enjoying a more secure retirement, working with a financial advisor in Elk Grove, CA to create your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Elk Grove, CA wealth management and retirement planning firms are as attuned to the requirements of entrepreneurs as well as Correct Capital. Our founder's father was a small business owner himself (read more of our story here), and we take pride in assisting business owners in their retirement planning needs. We understand that your business and retirement aspirations aren’t limited to simple financial figures, and we work tirelessly to provide customized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Elk Grove, CA, or call Correct Capital at 877-930-401k or contact us online to talk to a self-employed financial advisor in Elk Grove, CA today.
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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 immediate benefits today. With customizable contribution options to significant tax savings, consulting a financial advisor in Elk Grove, CA allows you to create your retirement plan to suit your specific needs.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) offers the freedom to adjust how much you save:
- Customizable Contributions: Set aside more during high-income years and scale back when revenues are down, so that your plan aligns with your financial situation.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw your savings tax-free down the road—a smart decision if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA lower your taxable income, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you might access state-specific credits as a business owner. These local incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can take advantage of 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 determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across a mix of asset classes like stocks and bonds serves to mitigate financial risk while continuing to build your savings.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net ensures you don’t using your retirement funds during financial hardships and incurring penalties.
Plan for the Future of Your Elk Grove, CA Business
Preparing for retirement also helps you plan ahead for what’s next with your Elk Grove, CA business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and won’t be included in the sale. These plans can provide the steady income you’ll need in the future. Keep in mind that while selling a business often leads to a capital gain, deposits into these plans are capped at annual limits (e.g., up to $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you’ll owe when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement accounts ensure a stable foundation during the change. You may also seek advice from a financial advisor with expertise in succession and retirement planning to reduce taxes during the sale.
With the right retirement plan, you manage your financial future, lower your tax bill, and create a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Elk Grove, CA Now?
Time remains one of the most valuable resources for building your retirement fund. Getting a head start not only lets you accumulate a more substantial retirement fund but also lowers the financial burden of catching up later in life. This is why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund 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 grow, and those returns, in turn, earn even more returns. The longer your money has to grow, the more significant the impact of this growth.
Example: Taylor and Alex are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor puts in $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Regular, modest investments made consistently can lead to substantial growth. Here’s a simple scenario showing the effect of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, all because of a 10-year delay.
Saving early, the less effort required each year to achieve your retirement goals.
*These calculations are based on estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. These examples are meant to provide general guidance and cannot predict actual future outcomes. Outcomes may change based on elements like market conditions, fees, and your unique situation. Always consult a financial advisor for personalized advice.
Take Control of Your Financial Future
For self-employed individuals in Elk Grove, CA, it can be tempting to put more emphasis on reinvesting in your business over saving for retirement. However, beginning a plan now enables you to:
- Benefit from tax-free future growth or withdrawals without taxes later on.
- Benefit from contribution flexibility that adapt to your cash flow.
- Establish a long-term safety measure that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll need to worry about making up for lost time later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the ability to concentrate on your objectives—both for your future retirement and your Elk Grove, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for those working for themselves in Elk Grove, CA, each offering its own advantages and considerations. A financial advisor will guide you to learn about the pros and cons of each option and determine the one best suited for your unique situation. Generally speaking, your self-employed retirement plan options in Elk Grove, CA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that offer specific tax advantages. In a conventional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but retirement distributions are taxable. In contrast, with Roth IRAs, you contribute are made with after-tax income, but eligible distributions during retirement, including earnings, are tax-free. In both cases, withdrawals are penalty-free if you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are accessible for individuals with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs offers a way to save for retirement that allows entrepreneurs to contribute a percentage of their net earnings. Contributions can only be made by an employer, so, as a independent business owner, you (the employee) would not be able to contribute more than 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. SEP IRAs may be ideal for entrepreneurs facing cycles of high revenue and low revenue. In contrast to some alternatives, SEP IRAs lack costly startup or administrative fees.
SEPs function like conventional IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Both employers and self-employed individuals can open 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), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for businesses without employees or if the only employee is your spouse. Solo 401(k)s function similarly to employer-sponsored 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the extra savings options often come with more restricted investment choices. Using a solo 401(k), you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you have the ability to make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employment income, subject to the annual contribution limit. In 2025, those limits are $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Employer 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 elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (as of 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that provides a set amount to entrepreneurs upon retirement. In contrast to the plans discussed earlier, this plan is not influenced by market performance, but allows self-employed individuals to know the precise amount they'll get in retirement. This plan is ideal for high-earning professionals who aim to accumulate a substantial amount for retirement and are willing to make substantial contributions. Contributions are tax deferred, and withdrawals are taxable as income during retirement.
Eligibility: Entrepreneurs managing a one-person company or with a small staff of under five are eligible to open an individual defined benefit plan, but it's most commonly suggested for those over 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans include:
- Business owners or partners who want to invest more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Businesses with proven consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The cap on contributions must be determined by an actuary using your income, age, and retirement goals. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Elk Grove, CA for Your Self-Employed Retirement Plan
A financial advisor in Elk Grove, CA specialized in self-employed retirement plans can be an essential partner for self-employed individuals. They bring the skills needed to navigate the complexities of retirement planning and craft a personalized approach that matches your objectives. An expert in your area will review your finances, identify your risk preferences, and guide you in choosing wisely about saving and investing for retirement. Part of what we do for you includes:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Customize the plan to your needs even further
- Adopt a written plan as required by IRS rules
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Review and modify your plan as needed
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in Elk Grove, CA: Correct Capital's Process
Entrepreneurs in Elk Grove, CA who lack the time, interest, or knowledge to manage their self-employed retirement plan themselves may end up overwhelmed as they look at their options. With Correct Capital, our Elk Grove, CA financial advisors manage the lion's share of your retirement strategy 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 a quick, four-step process:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction lets us get a sense of your goals with no obligation or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll gather information, including how many employees you have (if any), your current financial situation, and your retirement goals. This helps us create a personalized strategy that aligns with your goals.
- Review Your Plan: After we put together a plan using the information you provide, we'll sit down with you and discuss your plan thoroughly to help you fully grasp it and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can begin contributing. Throughout our relationship, we'll meet with you and track your progress to ensure it stays suited to your needs.
Our Elk Grove, CA financial advisors and retirement plan consultants act as fiduciary advisors, which means they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Elk Grove, CA include:
- 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
To you, your business is more than "just a business", and your Elk Grove, CA financial advisors should provide more than just good financial guidance. At Correct Capital, we focus on building a relationship with our clients and their businesses to deliver tailored self-employed retirement plans. To every client in Elk Grove, CA, we provide our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
