Self-employed retirement plans in Fairview Heights, IL. The freedom of having your own business in Fairview Heights, IL is a fantastic aspect of being self-employed. But that freedom can come with a lack of security, especially in when it comes to saving for retirement, employer-sponsored plans aren't an option. Only 13% of self-employed people have retirement plans they can contribute to, but many would be better off exploring what plans are available. 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 significant tax advantages that can help you improve your bottom line.
Few financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner as well as Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can read more about our story on our website). We have a deep understanding that your business and retirement goals extend far beyond mere monetary figures, and we are dedicated to providing personalized solutions that reflect your goals. Read on to discover more about your self-employed retirement plan options in Fairview Heights, IL, or call Correct Capital at 877-930-4015 or contact us online to speak to a member of our advisory team now.
Types of Self-Employed Retirement Plans
There are a few different retirement savings options that the self-employed can contribute to, each with its own set of benefits and considerations. A Fairview Heights, IL financial advisor can help you comprehend the advantages and disadvantages of each option and opt for that works best for you. Generally, your self-employed retirement plan options in Fairview Heights, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that allows you to set aside money for the future, with special tax considerations. In a traditional IRA, deposits are typically tax-deductible, and any gains on investments grow tax-deferred, but distributions in retirement are liable to income tax. On the other hand, Roth IRA payments are made with money you've already paid taxes on, but qualified distributions in retirement, including investment gains, are tax-free. In both accounts, withdrawals are penalty-free 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, the maximum yearly contributions 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 annual income from self-employment. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, you must contribute an equal amount to their pensions. You may choose to contribute either a fixed dollar sum or a percentage of annual income to employee accounts. SEP IRAs may be a suitable self-employed retirement plan for businesses that experience fluctuating income periods. SEP IRAs don't have the costly startup or administrative fees often associated with other retirement plans.
SEPs work like traditional IRAs, where contributions are made with money you haven't paid taxes on and withdrawals are taxed as income.
Eligibility: Self-employed individuals and any employer, 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 self-employed people, the amount eligible to be contributed is based on a special 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 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 greater potential for savings than some other retirement savings plans, however the additional opportunities for saving are often offset 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 business owners and their spouses can set up 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 a maximum 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.
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 offers a an assured benefit to self-employed individuals upon retirement. As opposed to 401(k)s or IRAs, a defined benefit plan doesn't oscillate based on investment returns, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a significant sum for retirement and are willing to make significant contributions. Contributions are tax deferred and withdrawals 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 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 desire to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who are sure of their 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 calculated by an actuary who calculates for your income, age, and retirement goals. Contribution limits change annually.
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 indispensable for self-employed individuals. They have the expertise to help you navigate the intricacies of retirement planning and create a customized plan that aligns with your goals. A financial planner will look at where your finances currently are, understand your risk tolerance, and help you make sound decisions about your financial future. 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 guidance as you continue on the road to retirement
- 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 without the time, interest, or knowledge to handle their self-employed retirement plan themselves can become stressed 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 business and retirement aspirations as easy as we possibly can. We can help you establish and maintain your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need 20 minutes for one of our advisors to know if we're suitable for you and your business. This short introduction lets us get a feel for what you're looking for with no major time investment for you.
- Gather Information — If we both decide to move forward, we'll ask for more info, including the number of employees in your business (if applicable), 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 the specifics of your plan to ensure you understand it.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so your savings can start growing immediately. Throughout our relationship, we'll meet with you and adjust your plan so it stays consistent with your needs.
Our financial advisors and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's in your best interest. 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
Call Correct Capital for Your Fairview Heights, IL Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Fairview Heights, IL financial advisors need to offer more than just sound financial advice. Correct Capital enjoys getting to know our clients and their business to deliver customized self-employed retirement plans. We give all our Fairview Heights, IL clients our I.O.U. promise: all of the advice we give you will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Fairview Heights, IL, speak to a financial advisor today at 877-930-4015 or contact us online.
