Self-employed retirement plans Honolulu, HI. The freedom of owning your own business in Honolulu, HI is one of the greatest advantages of having a self-directed career. That said, this flexibility can come with certain challenges, notably when it comes to planning for retirement, since you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off looking into other possibilities. In addition to achieving a more secure retirement, working with a financial advisor in Honolulu, HI to establish your self-employed retirement plan can provide significant tax advantages that help you to move your business forward.
Few Honolulu, HI wealth management and retirement planning firms understand the needs of small business owners quite like Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and we take pride in supporting entrepreneurs with their retirement planning needs. We understand that your business and retirement aspirations aren’t limited to just monetary concerns, and we strive to provide personalized solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in Honolulu, HI, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Honolulu, HI today.
Why Honolulu, HI Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver tangible benefits today. Offering flexibility in contributions to substantial tax savings, working with a financial advisor in Honolulu, HI enables you to create your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) gives you the freedom to adjust how much you save:
- Customizable Contributions: Contribute more during high-income years and cut back when your earnings dip, so your plan fits your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw without tax penalties in the future—an advantageous choice if you believe your tax rate to be higher in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, allowing you to keep more of your earnings.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you may be eligible for state-specific deductions as a business owner. These local incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can claim a tax 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 about how you invest:
- Diversified Portfolios: Spreading your investments across different stocks, bonds, and other assets can help minimize exposure to risk while continuing to build your retirement fund.
- 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 facing tax penalties.
Plan for the Future of Your Honolulu, HI Business
A thoughtful retirement strategy enables you to think through what’s next with your Honolulu, HI business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and are not part of the sale. These plans can provide the steady income you’ll need in the future. Remember that while the sale of a business usually creates a capital gain, deposits into these plans are capped at annual limits (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, factoring in catch-up contributions, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you are required to pay when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your nest egg provide the funds you need through the transition. You may also seek advice from a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens on the sale.
With the best-fit retirement strategy, you gain control over your financial future, lower your tax bill, and establish a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Honolulu, HI Now?
There’s no denying that time is one of the most important factors when it comes to saving for retirement. Beginning sooner rather than later not only helps you grow a more substantial retirement fund but also lowers the stress of playing catch-up as you get older. Here’s why it pays to take action now:
The Cost of Waiting
Delaying your retirement savings may cause a substantial impact on the amount you’ll have when you stop working. The main reason is compound interest—the concept where your investments grow, and those returns, then, accumulate even more returns. The longer your money has to grow, the larger the effect of this compounding process.
Example: Two individuals, Alex and Taylor are both self-employed individuals. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but saves $7,500 annually to make up for lost time.
By age 65, using a projected 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Small, consistent savings invested steadily can lead to significant growth. Take a look at this scenario showing the power of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an average annual return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, just from a 10-year delay.
Starting sooner, the less you need to save each year to reach your retirement goals.
*The numbers shown in this scenario represent estimates calculated using NerdWallet’s Compound Interest Calculator, based on a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. This information is meant to provide general guidance and are not a promise of future results. Actual results may vary depending on variables including market conditions, fees, and your unique situation. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Honolulu, HI, it can be tempting to put more emphasis on reinvesting in your business over saving for retirement. Even so, initiating a plan now allows you to:
- Leverage growth that is tax-deferred or tax-free withdrawals down the road.
- Enjoy contribution flexibility that align with your cash flow.
- Build a long-term safety measure that offers peace of mind, no matter how your business evolves.
Starting early, the less you’ll have to worry about playing catch-up later in life. Saving for retirement now means managing your financial future and allowing yourself the opportunity to focus on your dreams—both for your retirement years and your Honolulu, HI business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options designed for entrepreneurs in Honolulu, HI, each with its own benefits and trade-offs. A financial advisor can help you evaluate the pros and cons of each option and identify the one most suitable for your unique situation. Generally speaking, your self-employed retirement plan options in Honolulu, HI consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that include key tax perks. In a traditional IRA, contributions are typically 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 qualified withdrawals in retirement, including earnings, are not taxed. In both types of accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike plans linked to your job, traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA serves as a retirement savings option that enables self-employed individuals to set aside a portion of their self-employment income. Contributions can only be made by an employer, so, as a independent business owner, you (the employee) are limited to contributions from the employer role beyond the 25% you (the employer) already contributed. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a set monetary value or a percentage of wages to employee accounts. SEP IRAs works well for businesses that experience periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs work like conventional IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Both employers and 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 contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for businesses with no employees or where the only employee is a spouse. Solo 401(k)s function similarly to traditional employer-managed 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the additional opportunities often come with more restricted investment choices. With this type of plan, you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your earned income from self-employment, up to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Contributions as an employer (as an employer) are limited to 25% of your adjusted self-employment income, which is your net profit minus half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 if you're over age 50 (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan offers a structured retirement solution that provides a set amount to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but allows self-employed individuals to know exactly how much they'll have in retirement. This option is best suited for wealthier entrepreneurs who are focused on saving a substantial amount for retirement and are willing to make substantial contributions. Contributions offer tax-deferred growth, and withdrawals are taxable as income in retirement.
Eligibility: Self-employed professionals managing a one-person company or employing fewer than five people can open an individual defined benefit plan, but it's generally suggested for people above age 50 who generate a minimum of $250,000 yearly. Typically, 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+)
- Businesses currently investing 3-4% with plans to contribute more
- Businesses showing consistent profit patterns
- Business leaders over age 40 who wish to accelerate savings or boost savings within a short timeframe
Contribution Limits: The contribution limit must be determined by an actuary using your income, age, and retirement goals. Limits on contributions are adjusted each year.
The Importance of a Financial Advisor in Honolulu, HI for Your Self-Employed Retirement Plan
Partnering with an advisor in Honolulu, HI experienced with retirement plans for the self-employed can be an invaluable resource for self-employed individuals. They bring the skills needed to understand the intricacies of saving for retirement and develop a personalized approach that matches your objectives. Your advisor in Honolulu, HI will evaluate your financial situation, identify your risk preferences, and assist you in making informed decisions about saving and investing for retirement. Included in what we do for you includes:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Tailor the plan to your specific situation even further
- Adopt a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Offer continued financial education and guidance to help you navigate your retirement journey
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in Honolulu, HI: Correct Capital's Process
Self-employed individuals in Honolulu, HI who lack the time, interest, or knowledge to manage their self-employed retirement plan on their own often feel overwhelmed when faced with their options. At Correct Capital, our Honolulu, HI financial advisors handle the lion's share of your retirement planning for you, to help make meeting your retirement goals as hassle-free as possible for you. We can help you get set 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 our services align for you and your business. This brief introduction allows us to understand what you're looking for with no pressure or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll request information, including how many employees you have (if any), your current financial situation, and your long-term savings targets. This enables us to craft a tailored approach that aligns with your goals.
- Review Your Plan: Once we've developed a plan based on the information you provide, we'll schedule a meeting and discuss your plan in detail to make sure it's clear and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll implement the necessary steps so you can start saving. Over the course of our partnership, we'll check in and track your progress to make sure it remains aligned with your goals.
Our Honolulu, HI financial advisors and retirement plan consultants act as fiduciary advisors, which means they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Honolulu, HI include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Honolulu, HI
You don't see your business as "just a business", and your Honolulu, HI financial advisors must deliver more than just good financial guidance. At Correct Capital, we take the time to get to know our clients and their businesses to provide personalized self-employed retirement plans. We offer all our Honolulu, HI 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, reach out to Correct Capital at 877-930-401k or contact us online.
