Self-employed retirement plans in Fairview Heights, IL. The flexibility involved with having your own business in Fairview Heights, IL is a wonderful advantage to working for yourself. But that freedom can come with a lack of security, particularly in in regards to saving for retirement, as you don't have access to any employer plans. Only a fraction of self-employed individuals have a workplace retirement plan, but many would be better off exploring their options. In addition to setting you up for the retirement of your dreams, working with a financial advisor to get started and maintain your self-employed retirement plan in Fairview Heights, IL offers favorable tax incentives that can help propel you and your business towards success.
Not many financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners as well as Correct Capital. Our founder's father was a small business owner himself (you can discover more about our story here). We have a deep understanding that your business and retirement goals transcend figures and numbers, and we are devoted to offering personalized plans that reflect your goals. Read on to learn more about your self-employed retirement plan options in Fairview Heights, IL, or call Correct Capital at 314-930-401(k) or fill out our online form to speak to a member of our advisory team now.
What Self-Employed Retirement Plans Are There?
There are several retirement savings plans that the self-employed can set up, each with its own set of benefits and considerations. A Fairview Heights, IL financial advisor can help you understand the advantages and disadvantages of each option and opt for the most suitable one for your situation. Generally, your self-employed retirement plan options in Fairview Heights, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are long-term savings plans that offer specific tax advantages. In a traditional IRA, contributions are deducted from your taxable income, and investment earnings grow tax-deferred, but withdrawals in retirement are taxed as if it were income. On the other hand, Roth IRA contributions are made with money you've already paid taxes on, but qualified distributions in retirement, including earnings, are tax-free. In both a traditional an a Roth IRA, distributions can be made without penalty if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to 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 portion of of the money they make from their 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, you would have to contribute the same amount for them as you do for yourself. 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 for businesses that go through cycles of high revenue and low revenue. SEP IRAs don't have the costly startup or administrative fees often associated with other retirement plans.
SEPs work like traditional IRAs, where deposits are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Any employer, including the self-employed, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the amount eligible to be contributed is decided by a unique calculation.
Solo 401(k)
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 sole proprietors or those whose only employee is a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can add funds as both an employer or employee with pre-tax money. This offers more savings than some other retirement savings plans, however the additional opportunities for saving are often offset by having less investment options available. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses have access to one-participant 401(k)s.
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) which cannot exceed a maximum of 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.
On an annual basis, contributions 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 provides a an assured benefit to self-employed individuals upon retirement. As opposed to other types of retirement plans, a defined benefit plan doesn't go up and down based on investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and are willing to add significant contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs a business with no employees besides the owner or has less than five employees can open an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn at least $250,000 a year. Those interested in defined benefit plans tend to be:
- Partners or owners who want to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to do more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire 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 change every year.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Fairview Heights, IL
A financial advisor in Fairview Heights, IL specialized in self-employed retirement plans can be a crucial partner for self-employed individuals. They have the expertise to help you navigate the intricacies of retirement planning and develop a tailored strategy that acts as a roadmap through your financial future. A financial planner will evaluate where your finances currently are, understand your risk tolerance, and help you make smart decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Tailor 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 support as long as you work with us
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Fairview Heights, IL: Correct Capital's Process
Fairview Heights, IL business owners who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become stressed when looking at their options. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work for you, and attempt to make meeting your business and retirement goals as simple as we possibly can. We can help you get set up with your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes 20 minutes for one of our advisors to understand if we're the best firm to help you reach your goals. This short introduction allows us to get a feel for what you're looking for with no obligation for you.
- Gather Information — If we both decide to move forward, we'll ask for more info, including how many employees you have (if any), your current financial situation, and your retirement goals. 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 go over the details of your plan to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so you can start saving. Throughout your time partnering with us, 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 have a legal and ethical obligation to do what's best for you and only you. We pride ourselves in providing transparent communication and excellent service to assist you attain your self-employed retirement goals.
Other services we offer in Fairview Heights, IL include:
- Succession Planning
- 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
Call Correct Capital for Your Fairview Heights, IL Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Fairview Heights, IL financial advisors need to offer more than merely sound financial advice. Correct Capital enjoys getting to know our clients and their business to deliver personalized self-employed retirement plans. We give all our Fairview Heights, IL clients our 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 Fairview Heights, IL, speak to a member of our team today at 314-930-401(k) or contact us online.
