Self-employed retirement plans Knoxville, TN. The independence of being your own boss in Knoxville, TN is one of the greatest advantages of having a self-directed career. Even so, this independence can come with potential drawbacks, especially regarding planning for retirement, since you don't have the option of employer-sponsored retirement plans. 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, seeking advice from a financial advisor in Knoxville, TN to create your self-employed retirement plan delivers significant tax advantages that allow you to move your business forward.
Few Knoxville, TN financial advisory and retirement planning firms understand the needs of small business owners better than Correct Capital. Our founder's father was a small business owner himself (check out our story here), and we are deeply experienced in supporting entrepreneurs with their retirement planning needs. We recognize that your professional and personal aspirations go far beyond basic numbers, and we work tirelessly to create personalized solutions to meet your unique goals. Keep reading to learn more about your self-employed retirement plan options in Knoxville, TN, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a entrepreneurial financial advisor in Knoxville, TN today.
Why Knoxville, TN Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also deliver real benefits today. From flexible contributions to considerable tax savings, consulting a financial advisor in Knoxville, TN allows you to create your retirement plan to suit your specific needs.
Flexibility That Fits Your Income
When your earnings vary over time, 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 profitable years and reduce savings when income is lower, ensuring your plan aligns with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw tax-free later—an advantageous choice if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer significant tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) reduce what you owe in taxes, allowing you to keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to compound.
- State-Specific Incentives: Depending on where you live, you might access additional tax breaks as a sole proprietor. These local incentives make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants 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
Creating a stable future goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across different stocks, bonds, and alternatives can help mitigate financial risk while continuing to build your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund prevents you from using your retirement funds during tough times and incurring penalties.
Plan for the Future of Your Knoxville, TN Business
A thoughtful retirement strategy can assist you plan ahead for what’s next with your Knoxville, TN business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These savings offer the financial stability you’ll need during retirement. It’s important to note that while the sale of a business usually creates a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Making the most of retirement savings can reduce the taxes you’ll owe when you sell your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts ensure a stable foundation through the transition. You can also partner with a financial advisor with expertise in succession and retirement planning to reduce taxes on the sale.
With the proper savings strategy, you manage your financial future, cut down your tax obligations, and establish a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Knoxville, TN Now?
There’s no denying that time is one of the most crucial resources when it comes to saving for retirement. Getting a head start not only lets you accumulate a larger nest egg but also minimizes the pressure of playing catch-up as you get older. Here’s why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement could lead to a substantial impact on the savings you’ll have when you reach retirement age. The biggest reason is compound interest—the financial principle where your investments earn returns, and those returns, then, earn even more returns. The longer your money has to grow, the more significant the impact of this compounding process.
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 postpones starting contributions to age 40 but contributes $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently can lead to substantial growth. Consider this example showing the effect of compound interest:
- Starting at age 25: By investing $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 shortfall of over $260,000, just from a 10-year delay.
The earlier you begin, the lower your annual savings needs each year to meet your retirement goals.
*These calculations represent estimates generated with 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 intended as illustrative examples and cannot predict actual future outcomes. Your individual results may differ depending on variables including market conditions, fees, and personal factors. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
For self-employed individuals in Knoxville, TN, it is often the case that you put more emphasis on reinvesting in your business over saving for retirement. Even so, initiating a plan now gives you the chance to:
- Benefit from tax-deferred growth or tax-free withdrawals in the future.
- Benefit from flexible contributions that change with your cash flow.
- Establish a long-term safety measure that ensures stability, no matter how your business changes.
Starting early, the less you’ll need to worry about making up for lost time later in life. Building your retirement savings today means managing your financial future and allowing yourself the ability to focus on your goals—both for your retirement years and your Knoxville, TN business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for entrepreneurs in Knoxville, TN, each providing its own benefits and trade-offs. A financial advisor will guide you to understand the advantages and disadvantages of each plan and determine the one best suited for your circumstances. Typically, your self-employed retirement plan options in Knoxville, TN consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that offer key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but retirement distributions are taxable. In contrast, Roth IRA contributions from post-tax earnings, but qualified withdrawals in retirement, including earnings, are not taxed. In both accounts, withdrawals are penalty-free 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 open to those with a source of income.
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: SEP IRAs is a retirement plan that enables self-employed individuals to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) cannot make additional contributions above the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. You may choose to contribute a fixed dollar figure or a percentage of wages to employee accounts. A SEP IRA works well for entrepreneurs facing fluctuating revenue streams. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs operate like standard IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including 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: Solo 401(k)s, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for businesses with no employees or when the sole employee is your spouse. Solo 401(k)s operate much like standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This offers more savings than SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which have 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 can make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employment income, up to 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.
- Employer profit-sharing contributions (as an employer) are limited to 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.
The total contribution cannot exceed $70,000, or $77,500 for those aged 50 and older (for 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that provides a fixed, predetermined benefit 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 what they'll have in retirement. This option is recommended for higher-income entrepreneurs who want to save a large amount for retirement and can commit to making larger deposits. Contributions are tax deferred, and withdrawals are taxable as income during retirement.
Eligibility: Self-employed professionals running an owner-only business or with less than five employees are eligible to open an individual defined benefit plan, but it's most commonly advised for those over 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans tend to be:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% with plans to contribute more
- Organizations that have demonstrated consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The contribution limit requires calculation from an actuary based on your income, age, and retirement goals. Limits on contributions change annually.
The Importance of a Financial Advisor in Knoxville, TN for Your Self-Employed Retirement Plan
A financial advisor in Knoxville, TN experienced with retirement plans for the self-employed is an invaluable resource for self-employed individuals. They offer the knowledge to assist guide you through the challenges of retirement planning and craft a customized plan that reflects your aspirations. An expert in your area will evaluate your financial situation, identify your risk preferences, and assist you in making informed decisions about saving and investing for retirement. A key part of what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Further adapt the plan to fit you personally even further
- Formalize a plan in writing as required by IRS rules
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Monitor and adjust 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 Knoxville, TN: Correct Capital's Process
Knoxville, TN business owners who aren’t equipped with the time or understanding to oversee their retirement savings strategy themselves can become overwhelmed by their options. With Correct Capital, our Knoxville, TN financial advisors manage 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: In just 20 minutes, a member of our advisor team can determine if we're suited to your needs for you and your business. This initial call helps us learn about your needs with no obligation or major time investment on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including your employee count, your current financial situation, and your long-term savings targets. This helps us create a personalized strategy designed just for you.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll sit down with you and go over your plan thoroughly to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll put everything in place so you can start saving. Over the course of our partnership, we'll meet with you and monitor your plan to make sure it remains aligned with your goals.
Our Knoxville, TN financial advisors and retirement plan consultants are fiduciary advisors, which means they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in Knoxville, TN 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 Knoxville, TN
To you, your business is more than "just a business", and your Knoxville, TN financial advisors need to offer more than just good financial guidance. With Correct Capital, we focus on building a relationship with our clients and their businesses to create personalized self-employed retirement plans. All our clients in Knoxville, TN benefit from 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, call Correct Capital today at 877-930-401k or contact us online.
