Self-employed retirement plans Honolulu, HI. The freedom of running your own company in Honolulu, HI is one of the greatest advantages of having a self-directed career. However, this freedom sometimes brings with potential drawbacks, especially regarding retirement savings, since you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless should consider understanding their retirement options. In addition to enjoying a more comfortable retirement, working with a financial advisor in Honolulu, HI to establish your self-employed retirement plan delivers significant tax advantages that help both you and your business to thrive.
Few Honolulu, HI financial advisory and retirement planning firms truly grasp the challenges faced by entrepreneurs 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 take pride in assisting business owners in their retirement planning needs. We understand that your goals for your business and retirement go far beyond simple financial figures, and we are dedicated to offer personalized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Honolulu, HI, or call Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Honolulu, HI today.
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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. From flexible contributions to significant tax savings, consulting a financial advisor in Honolulu, HI allows you to customize your retirement plan to fit 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 option to modify how much you save:
- Customizable Contributions: Save extra during successful years and scale back when your earnings dip, so your plan works with your cash flow.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw tax-free later—a smart decision if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to grow.
- State-Specific Incentives: In some states, you might access state-specific tax breaks as a self-employed individual. These regional incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can apply for a credit of up to 50% of the first $2,000 put into a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across varied stocks, bonds, and alternatives can help reduce risk while continuing to build your savings.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net helps you avoid dipping into savings during financial hardships and incurring penalties.
Plan for the Future of Your Honolulu, HI Business
Retirement planning enables you to plan ahead for 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 stay in your name and are not part of the sale. These accounts offer the financial stability you’ll need later on. Keep in mind that while selling your business results in a capital gain, retirement plan contributions are subject to yearly maximums (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you might face when you sell your business.
- Succession Planning: Whether you’re transferring ownership, your nest egg offer financial security during the change. You can also partner with 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, reduce your tax burden, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Honolulu, HI Now?
Time is one of the most important factors in retirement planning. Beginning sooner rather than later not only helps you grow a bigger financial cushion but also minimizes the pressure of playing catch-up as you get older. This is why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement can have a substantial impact on the savings you’ll have when you retire. The main reason is compound interest—the financial principle where your investments earn returns, and those returns, subsequently, generate even more returns. The more time your money has to grow, the more significant the benefit of compounding.
Example: Taylor and Alex are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but saves $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily often create impressive growth. Consider this example showing the power of consistent growth:
- 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: Saving the same $200 per month yields only $235,412.97* by age 65—a difference of over $260,000, just from a 10-year delay.
Saving early, the less effort required each year to meet your retirement goals.
*The numbers shown in this scenario are estimates derived from NerdWallet’s Compound Interest Calculator, based on a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. This information is meant to provide general guidance and do not guarantee future performance. Actual results may vary due to variables including 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 Honolulu, HI, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. However, beginning a plan now gives you the chance to:
- Benefit from tax-deferred growth or withdrawals without taxes down the road.
- Take advantage of adjustable savings that align with your earnings.
- Establish a safety net that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll have to worry about catching up later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the ability to focus on your dreams—both for your golden years and your Honolulu, HI business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for entrepreneurs in Honolulu, HI, each offering its own benefits and trade-offs. A financial advisor can help you learn about the advantages and disadvantages of each plan and identify the one ideal for your unique situation. Generally speaking, your self-employed retirement plan options in Honolulu, HI include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that provide distinct tax benefits. In a standard IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but withdrawals in retirement are subject to income tax. In contrast, with Roth IRAs, you contribute are made with after-tax income, but eligible distributions during retirement, including earnings, are not taxed. In both types of accounts, withdrawals come without penalties as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, both traditional and Roth IRAs are available to anyone with a source of 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 is a retirement plan that permits self-employed individuals to set aside a portion of their self-employment income. Contributions are strictly employer contributions 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, it's required to contribute the same amount for them as you do for yourself. You may choose to contribute a set monetary value or a percentage of wages to employee accounts. SEP IRAs is a good option for businesses that experience fluctuating revenue streams. In contrast to some alternatives, SEP IRAs don’t have costly startup or administrative fees.
SEPs work like traditional IRAs, where you contribute pre-tax dollars and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser 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: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan intended for companies that have no employees or if the only employee is your spouse. This type of plan operate much like standard 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This provides more savings versus SEPs or IRAs; however, the extra savings options may be offset by more restricted investment choices. 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: This plan is exclusively for 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 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 for those who turn 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 25% of your net self-employment income, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans represents a type of retirement plan that guarantees a fixed, predetermined benefit to self-employed individuals upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand the precise amount they'll get in retirement. This plan is recommended for high-earning self-employed individuals who want to save a significant sum for retirement and are prepared to contribute substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxable as income during retirement.
Eligibility: Any self-employed individual operating a solo business or employing fewer than five people are eligible to open an individual defined benefit plan, but it's generally suggested for people above age 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Companies already contributing 3-4% but are open to increasing contributions
- Companies with proven consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The maximum allowable contribution requires calculation from an actuary determined by your income, age, and retirement goals. Limits on contributions change annually.
The Importance of a Financial Advisor in Honolulu, HI for Your Self-Employed Retirement Plan
A financial advisor in Honolulu, HI focused on self-employed retirement strategies is an important asset 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. Your advisor in Honolulu, HI will evaluate your financial situation, determine how much risk you’re comfortable with, and assist you in selecting the best options about saving and investing for retirement. Included in what we do for you involves:
- Help you choose a plan that aligns with your objectives and circumstances
- Tailor the plan to your specific situation even further
- Create a written plan that complies with IRS regulations
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Monitor and adjust your plan as needed
- Provide ongoing education and advice throughout your retirement planning process
- Maximize what you receive in retirement by maximizing your social security benefits
Self-Employed Retirement Plans in Honolulu, HI: Correct Capital's Process
Self-employed individuals in Honolulu, HI who aren’t equipped with the time or understanding to handle their retirement savings strategy themselves often feel overwhelmed by their options. Through our team at Correct Capital, our Honolulu, HI financial advisors take on the lion's share of your retirement strategy for you, and strive to ensure meeting your future savings targets as easy 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 determine if we're a good fit for you and your business. This short conversation allows us to get a sense of your goals with zero commitment or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including whether you have employees, your present financial standing, and your long-term savings targets. This allows us to put together a tailored approach designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll schedule a meeting and discuss your plan step by step to ensure you understand it and understand how it best correlates to your needs.
- Implementation and Monitoring: Once we've agreed on your plan, we'll set everything up so you can start saving. Throughout our relationship, we'll meet with you and track your progress to keep it tailored to your evolving circumstances.
Our Honolulu, HI financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Honolulu, HI 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 Honolulu, HI
Your business isn't "just a business" to you, and your Honolulu, HI financial advisors should provide more than simply sound financial advice. With Correct Capital, we take the time to get to know our clients and their businesses to deliver customized self-employed retirement plans. We offer all our Honolulu, HI clients 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.
