Self-employed retirement plans Houston, TX. The independence of owning your own business in Houston, TX offers many benefits of working for yourself. That said, this freedom sometimes brings with potential drawbacks, especially when it comes to building your retirement fund, since you don't have the benefit of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off looking into other possibilities. In addition to achieving a more comfortable retirement, partnering with a financial advisor in Houston, TX to create your self-employed retirement plan can provide significant tax advantages that help both you and your business to thrive.
Few Houston, TX investment consulting and retirement planning firms understand the needs of small business owners as well as Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (read more of our story here), and we are deeply experienced in supporting entrepreneurs with their retirement planning needs. We know that your business and retirement aspirations extend well past basic numbers, and we work tirelessly to create personalized solutions aligned with your vision. Read on to discover about your self-employed retirement plan options in Houston, TX, or call Correct Capital at 877-930-401k or contact us online to talk to a self-employed financial advisor in Houston, TX today.
Why Houston, TX Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also provide real benefits today. From flexible contributions to considerable tax savings, consulting a financial advisor in Houston, TX enables you to design your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) gives you the freedom to adjust how much you save:
- Customizable Contributions: Set aside more during successful years and reduce savings when revenues are down, so your plan works with your financial situation.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, so you can withdraw without tax penalties in the future—a smart decision if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, allowing you to keep more of your income.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, giving your money more time to grow.
- State-Specific Incentives: In some states, you might access extra tax breaks as a business owner. These local incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can take advantage of a credit of up to 50% of the first $2,000 put into a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement requires more than how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and alternatives serves to minimize exposure to risk while continuing to build your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund helps you avoid using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Houston, TX Business
Preparing for retirement also helps you think through what’s next with your Houston, TX business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and are not part of the sale. These plans offer the steady income you’ll need in the future. Remember that while the sale of a business usually creates a capital gain, retirement plan contributions are restricted by contribution limits (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you are required to pay when you pass on your business.
- Succession Planning: If you’re passing the business on, your nest egg ensure financial security as you make this shift. You can also work with a financial advisor with expertise in succession and retirement planning to help with taxes associated with the transaction.
With the proper savings strategy, you manage your financial future, cut down your tax obligations, and build a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Houston, TX Now?
Time is one of the most important factors when it comes to saving for retirement. Starting early not only allows you to build a bigger financial cushion but also minimizes the pressure of catching up later in life. Here’s why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund can have a substantial impact on the total you’ll have when you retire. The biggest reason is compound interest—the financial principle where your investments grow, and those returns, then, earn even more returns. The greater time span your money has to grow, the larger the effect of compounding.
Example: Two individuals, Alex and Taylor are both self-employed professionals. Both of them want 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 bridge the gap.
By age 65, using a projected 7% annual return:
- Alex contributes $180,000 and accumulates $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $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: Putting aside $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 yields only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
The earlier you begin, the less you need to save each year to reach your retirement goals.
*The numbers shown in this scenario are based on estimates generated with NerdWallet’s Compound Interest Calculator, assuming 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 intended as illustrative examples and cannot predict actual future outcomes. Outcomes may change depending on factors such as market conditions, fees, and individual circumstances. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Houston, TX, it is often the case that you focus more on reinvesting in your business rather than saving for retirement. However, initiating a plan now enables you to:
- Take advantage of tax-free future growth or withdrawals without taxes later on.
- Take advantage of flexible contributions that change with your cash flow.
- Build a financial cushion that provides security, no matter how your business develops.
Starting early, the less you’ll be required to worry about playing catch-up later in life. Building your retirement savings today means taking control of your financial future and giving yourself the ability to concentrate on your objectives—both for your future retirement and your Houston, TX business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for self-employed individuals in Houston, TX, each offering its own pros and cons. A financial advisor will guide you to learn about the advantages and disadvantages of each option and determine the one most suitable for your needs. Generally speaking, your self-employed retirement plan options in Houston, TX consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that offer distinct tax benefits. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but money taken out during retirement are taxable. In contrast, with Roth IRAs, you contribute from post-tax earnings, but eligible distributions during retirement, including earnings, are exempt from taxes. In both cases, withdrawals come without penalties if 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 accessible for individuals with an earned 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: SEP IRAs offers a way to save for retirement that permits those who are self-employed to save a percentage of their net business profits. 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 more than the 25% you (the employer) have designated. If you have employees, you must 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. This type of plan works well for businesses that experience periods of inconsistent earnings. Unlike other plans, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs operate like traditional IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses with no employees or where the only employee is a spouse. This type of plan function similarly to employer-sponsored 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This allows for more savings than SEPs or IRAs; however, the extra savings options may be offset by 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 are eligible to open 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 self-employed earnings, up to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 if you attain age 60-63 in 2025.
- Contributions as an employer (as an employer) cannot exceed 25% of your net earnings from self-employment, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that delivers a pre-established payout to business owners 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 receive in retirement. This plan is best suited for high-earning self-employed individuals who are focused on saving a significant sum for retirement and can commit to making larger deposits. Contributions are tax deferred, and withdrawals are taxed as income during retirement.
Eligibility: Any self-employed individual running an owner-only business or with a small staff of under five can open an individual defined benefit plan, but it's generally recommended for people above age 50 who make $250,000 or more annually. In most cases, good candidates for defined benefit plans are:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% with plans to contribute more
- Companies with proven consistent profit patterns
- Partners or owners 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 based on your financial situation, age, and savings targets. Limits on contributions are adjusted each year.
The Importance of a Financial Advisor in Houston, TX for Your Self-Employed Retirement Plan
Partnering with an advisor in Houston, TX experienced with retirement plans for the self-employed is an important asset for entrepreneurs. They have the expertise to help guide you through the challenges of retirement planning and develop a customized plan that aligns with your goals. Your advisor in Houston, TX will review your finances, determine how much risk you’re comfortable with, and assist you in choosing wisely about saving and investing for retirement. Part of what we do for you involves:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Further adapt the plan to your specific situation even further
- Formalize a plan in writing as required by IRS rules
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Houston, TX: Correct Capital's Process
Self-employed individuals in Houston, TX who don’t have the time or expertise to handle their self-employed retirement plan themselves may end up overwhelmed as they look at their choices. With Correct Capital, our Houston, TX financial advisors handle the bulk of your retirement strategy for you, working to make meeting your financial objectives as straightforward as possible for you. We will guide you in creating your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction allows us to get a sense of your goals with no obligation or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll request information, including your employee count, your current financial situation, and your long-term savings targets. This helps us create a tailored approach suited specifically for your needs.
- Review Your Plan: When we finalize a plan from the information you provide, we'll schedule a meeting and discuss your plan step by step 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 initiate your savings journey. Throughout our relationship, we'll meet with you and review your strategy to keep it tailored to your evolving circumstances.
Our Houston, TX financial advisors and retirement plan consultants are fiduciary advisors, which means they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Houston, TX include:
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
Call Correct Capital for Your Self-Employed Retirement Plan in Houston, TX
To you, your business is more than "just a business", and your Houston, TX financial advisors must deliver 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. All our clients in Houston, TX benefit from 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, contact Correct Capital now at 877-930-401k or contact us online.
