Self-employed retirement plans Kansas City, MO. The flexibility of owning your own business in Kansas City, MO offers many benefits of having a self-directed career. However, this freedom often comes with potential drawbacks, especially when it comes to retirement savings, as you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from looking into other possibilities. In addition to having a more comfortable retirement, seeking advice from a financial advisor in Kansas City, MO to create your self-employed retirement plan can provide significant tax advantages that help your business to grow and succeed.
Few Kansas City, MO wealth management and retirement planning firms truly grasp the challenges faced by self-employed individuals better than 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 our firm have a rich history of assisting business owners in their retirement planning needs. We know that your goals for your business and retirement extend well past basic numbers, and we strive to provide personalized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Kansas City, MO, or reach out to Correct Capital at 877-930-401k or contact us online to speak with a entrepreneurial financial advisor in Kansas City, MO today.
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Why Kansas City, MO Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide real benefits today. From flexible contributions to substantial tax savings, consulting a financial advisor in Kansas City, MO allows you to design your retirement plan to align with your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) provides the option to adjust how much you save:
- Customizable Contributions: Set aside more during successful years and cut back when income is lower, so your plan aligns with your current income.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, so you can withdraw without tax penalties in the future—an advantageous choice if you believe your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, helping you keep more of your earnings.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to grow.
- State-Specific Incentives: In some states, you may be eligible for extra credits as a self-employed individual. These regional incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, further reducing 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 linked to the way you invest:
- Diversified Portfolios: Spreading your investments across different asset classes like stocks and bonds can help mitigate financial risk while continuing to build your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a dedicated business safety net helps you avoid dipping into savings during tough times and incurring penalties.
Plan for the Future of Your Kansas City, MO Business
Preparing for retirement also helps you think through what’s next with your Kansas City, MO business:
- Selling Your Business: If you’re planning to sell, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and won’t be included in the sale. These accounts offer the reliable income you’ll need later on. Remember that while selling your business results in a capital gain, contributions to retirement accounts are capped at annual limits (e.g., up to $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, including catch-up contributions, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely helps lower the taxes you’ll owe when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts provide financial security during the change. You can also partner with a financial advisor with expertise in succession and retirement planning to minimize tax burdens on the sale.
With the right retirement plan, you can take control of your financial future, lower your tax bill, and create a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Kansas City, MO Now?
Time is one of the most important resources for building your retirement fund. Beginning sooner rather than later not only allows you to build a larger nest egg but also lowers the financial burden of playing catch-up as you get older. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings could lead to a significant impact on the savings you’ll have when you stop working. The biggest reason is compound interest—the concept where your investments grow, and those returns, then, generate even more returns. The greater time span your money has to grow, the more significant the effect of this growth.
Example: Two individuals, Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex invests $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
Regular, modest investments invested steadily often create impressive growth. Take a look at this scenario showing the effect of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, simply due to a 10-year delay.
Saving early, the less effort required each year to reach your retirement goals.
*These calculations are based on estimates generated with NerdWallet’s Compound Interest Calculator, based on a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. This information is meant to provide general guidance and cannot predict actual future outcomes. Your individual results may differ based on elements like market conditions, fees, and personal factors. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Kansas City, MO, it might seem easier to put more emphasis on reinvesting in your business instead of saving for retirement. That said, initiating a plan now gives you the chance to:
- Leverage growth that is tax-deferred or withdrawals without taxes in the future.
- Enjoy contribution flexibility that adapt to your earnings.
- Build a safety net that offers peace of mind, no matter how your business evolves.
Starting early, the less you’ll need to worry about making up for lost time later in life. Building your retirement savings today means taking control of your financial future and allowing yourself the freedom to concentrate on your dreams—both for your golden years and your Kansas City, MO business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for those working for themselves in Kansas City, MO, each offering its own pros and cons. A financial advisor can help you understand the benefits and drawbacks of each option and determine the one ideal for your unique situation. Typically, your self-employed retirement plan options in Kansas City, MO consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that provide key tax perks. In a conventional IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but money taken out during retirement are taxed as income. In contrast, Roth IRAs require contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals come without penalties as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are accessible for individuals with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped 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 offers a way to save for retirement that enables those who are self-employed to contribute a percentage of their net earnings. Contributions must come from 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. You have the flexibility to contribute a fixed dollar figure or a percentage of wages to employee accounts. This type of plan is a good option for entrepreneurs facing cycles of high revenue and low revenue. In contrast to some alternatives, 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: 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
If you’re self-employed, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, also called 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 function similarly to standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This provides more savings versus SEPs or IRAs; however, the increased savings potential may be offset by more limited investment options. 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 are eligible to open and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you can make two types of contributions:
- Employee contributions of up to 100% of your self-employed earnings, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you're over 50, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 25% of your net self-employment income, which is defined as net profit minus half of your self-employment tax and the employee contributions you made.
Total contributions are capped at $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that guarantees a fixed, predetermined benefit to business owners upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but lets individuals clearly understand exactly how much they'll have in retirement. This strategy is recommended for wealthier entrepreneurs who want to save a large amount for retirement and are willing to make substantial contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income in retirement.
Eligibility: Self-employed professionals managing a one-person company or with less than five employees can open an individual defined benefit plan, but it's typically suggested for those over 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% but are open to increasing contributions
- Businesses with proven consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions requires calculation from an actuary based on your financial situation, age, and savings targets. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Kansas City, MO for Your Self-Employed Retirement Plan
Working with a financial advisor in Kansas City, MO focused on self-employed retirement strategies can be an essential partner for those working for themselves. They offer the knowledge to assist guide you through the challenges of retirement planning and develop a personalized approach that matches your objectives. Your advisor in Kansas City, MO will assess where you stand financially, understand your risk tolerance, and guide you in making informed decisions about saving and investing for retirement. A key part of what we do for you features:
- Assist in selecting a plan that suits your unique requirements
- Tailor the plan to your needs even further
- Create a written plan as required by IRS rules
- Arrange a trust plan for assets
- Make sure 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 making the most of your social security
Self-Employed Retirement Plans in Kansas City, MO: Correct Capital's Process
Kansas City, MO business owners who don’t have the time or expertise to handle their retirement savings strategy themselves may end up overwhelmed by their choices. At Correct Capital, our Kansas City, MO financial advisors handle the lion's share of your retirement strategy for you, and strive to ensure meeting your retirement goals as easy as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can help understand if our services align for you and your business. This initial call allows us to learn about your needs with no obligation or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including whether you have employees, your present financial standing, and your future objectives. This helps us create a tailored approach suited specifically for your needs.
- Review Your Plan: After we put together a plan based on the information you provide, we'll sit down with you and go over your plan in detail to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll put everything in place so you can initiate your savings journey. As time goes on, we'll check in and monitor your plan to make sure it remains aligned with your goals.
Our Kansas City, MO financial advisors and retirement plan consultants act as fiduciary advisors, which means they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Kansas City, MO include:
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 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 Kansas City, MO
To you, your business is more than "just a business", and your Kansas City, MO financial advisors need to offer more than simply sound financial advice. Correct Capital takes pride in, we make it a priority to understand our clients and their businesses to create personalized self-employed retirement plans. To every client in Kansas City, MO, we provide 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, reach out to Correct Capital at 877-930-401k or contact us online.
