Self-employed retirement plans in Kirkwood, MO. The freedom of running your own business in Kirkwood, MO is a wonderful advantage to being self-employed. But more leeway can come with uncertainty, especially in when it comes to saving for retirement, employer-sponsored plans aren't an option. Only a fraction of self-employed people have a workplace retirement plan, but many would be better off exploring what plans are available. In addition to a more comfortable retirement, partnering with a financial advisor to get started and maintain your self-employed retirement plan in Kirkwood, MO offers tax benefits that can help free up much-needed funds for your business.
Few financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners as well as Correct Capital. Our founder's father was a small business owner himself (you can read more about our story on our website). We know that your business and retirement goals transcend spreadsheets and percentages, and we are committed to providing personalized plans that fit where you are and where you want to go. Read on to read more about your self-employed retirement plan options in Kirkwood, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team today.
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Types of Self-Employed Retirement Plans
There are several retirement savings plans available for self-employed individuals, each with its own set of benefits and considerations. A Kirkwood, MO financial advisor can help you comprehend the pros and cons of each option and opt for that helps both your short- and long-term goals. Typically, your self-employed retirement plan options in Kirkwood, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that offer specific tax advantages. In a traditional IRA, contributions are typically tax-deductible, and any gains on investments grow tax-deferred, but distributions in retirement are subject to income tax. On the other hand, Roth IRA contributions are made with money you've already paid taxes on, but qualified withdrawals in retirement, including investment gains, are tax-free. In both accounts, distributions can be made without extra fees as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through employment, traditional and Roth IRAs can be set up by anyone with an earned income.
Contribution Limits: For 2023, annual contribution limits 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. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 25%. If you have employees, they must receive the same amount you do. You may choose to contribute either a predetermined fixed dollar amount or a proportion of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that experience periods of variable income. SEP IRAs don't have expensive initial setup or administrative charges often associated with other retirement plans.
SEPs work like traditional IRAs, where payments are made with pre-tax money and withdrawals are taxed at your income at the time of distribution.
Eligibility: Any employer, including the self-employed, can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the amount eligible to be contributed is decided by 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 who only employ a spouse. Solo 401(k)s function about the same as employer-sponsored 401(k) plans, and you can add funds as both an employer or employee with pre-tax money. This offers increased savings opportunities than some other retirement savings plans, however the possibility of greater retirement savings is often offset by having less investment options available. In an individual 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only sole proprietors and their spouses have access to solo 401(k)s.
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 a maximum of 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 the defined contribution plans mentioned above, a defined benefit plan doesn't go up and down because of investment gains, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a significant sum for retirement and want to add substantial contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can open an individual defined benefit plan, but it's typically only recommended for those over 50 who earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who want to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is determined by an actuary who calculates for your income, age, and retirement goals. Contribution limits change annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Kirkwood, MO
A financial advisor in Kirkwood, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the experience to help you understand the complexities of retirement planning and implement a tailored strategy that acts as a roadmap through your financial future. A financial advisor will analyze your financial situation, help you figure out your risk tolerance, and help you make sound decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan in accordance with IRS guidelines
- 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 into and through retirement
- Increase your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Kirkwood, MO: Correct Capital's Process
Kirkwood, MO business owners who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become stressed when looking at their options. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work on your behalf, and strive to make achieving the golden years of your dreams as easy as we possibly can. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes 20 minutes for one of our advisors to understand if we're a good fit for you and your business. This brief introduction lets us understand your needs with no obligation on your part.
- Gather Information — If we seem like a good fit, we'll ask for more info, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to live. This allows us to put together a custom plan based entirely on type of advising you need.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and go over the details of your plan to ensure it's what you were looking for.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so you can start saving. As long as we work together, we'll keep you up-to-date with how things are going and monitor your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and morally obligated to do what's in your best interest. We pride ourselves in providing straightforward communication and high-quality service to help you reach your self-employed retirement goals.
Other services we offer in Kirkwood, MO include:
Call Correct Capital for Your Kirkwood, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Kirkwood, MO financial advisors need to offer more than just sound financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver tailored self-employed retirement plans. We offer all our Kirkwood, MO clients the same 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 Kirkwood, MO, speak to a member of our team today at 877-930-4015 or fill out our online form.
