Self-employed retirement plans in Lake St. Louis, MO. The flexibility involved with running your own business in Lake St. Louis, MO is a fantastic aspect of working for yourself. But that freedom can come with uncertainty, particularly in when it comes to saving for retirement, as you don't have access to any employer plans. Only a fraction of self-employed people have a workplace retirement plan, but many would be better off exploring their options. In addition to setting you up for the golden years of your dreams, partnering with a financial advisor to set up your self-employed retirement plan in Lake St. Louis, MO offers favorable tax incentives that can help free up much-needed funds for your business.
Only a handful of wealth management and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. Our founder's father was a small business owner himself (you can read more about our story on our website). We have a deep understanding that your business and retirement aspirations go beyond spreadsheets and percentages, and we are dedicated to providing personalized plans that reflect where you are and where you want to go. Read on to discover more about your self-employed retirement plan options in Lake St. Louis, 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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What Self-Employed Retirement Plans Are There?
There are a few different retirement savings plans available for self-employed individuals, and which is best for you depends on your unique situation. A Lake St. Louis, MO financial advisor can help you comprehend the pros and cons of each option and choose that works best for you. Generally, your self-employed retirement plan options in Lake St. Louis, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that provides individuals with tax advantages to save for retirement. In a traditional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are subject to income tax. In contrast, Roth IRA payments are made with money you've already paid taxes on, but qualified distributions in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals can be made without penalty 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, the maximum yearly contributions 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 net earnings from self-employment. Contributions can only be made by 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, you must contribute an equal amount to their plans. You can either contribute either a fixed dollar sum or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan for businesses that experience fluctuating income periods. SEP IRAs don't have the costly startup or administrative fees other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with money you've yet to pay taxes on and withdrawals are taxed at your income at the time of distribution.
Eligibility: Self-employed individuals and any employer, can set up a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the amount eligible to be contributed is based on a specific formula.
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 sole proprietors or those who only employ a spouse. Solo 401(k)s work 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 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 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 a fixed benefit to self-employed individuals once they've retired. As opposed to other types of retirement plans, a defined benefit plan doesn't go up and down based on investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a substantial portion 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 a business where they're the only owner 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 desire to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit must be decided by an actuary based on your income, age, and retirement goals. Contribution limits change annually.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Lake St. Louis, MO
A financial advisor in Lake St. Louis, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the knowledge to help you understand the intricacies of retirement planning and design a customized plan that aligns with your goals. A financial planner will evaluate where your finances currently are, adjust for your risk tolerance, and help you make smart decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Tailor 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 support as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Lake St. Louis, MO: Correct Capital's Process
Lake St. Louis, 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 overwhelmed when looking at their options. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning for you, and strive to make meeting your business and retirement goals as simple as possible for you. We can help you get set up with your self-employed retirement plan in four simple steps:
- Schedule a Call — We only need a brief 20-minute call for one of our advisors to understand if we're suitable for you and your business. This brief introduction allows us to understand what you're looking for with no obligation for you.
- 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 have. This allows us to put together a personalized 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 discuss your plan in detail 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. Throughout your time working with us, we'll meet with you and adjust your plan so it stays consistent with your needs.
Our financial advisors and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's in your best interest. We are proud to provide straightforward communication and high-quality service to assist you achieve your self-employed retirement goals.
Other services we offer in Lake St. Louis, MO include:
Call Correct Capital for Your Lake St. Louis, MO Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your Lake St. Louis, MO financial advisors need to offer more than merely wise financial advice. Correct Capital enjoys getting to know our clients and their business to deliver tailored self-employed retirement plans. We offer all our Lake St. Louis, MO clients 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 in Lake St. Louis, MO, call Correct Capital today at 877-930-4015 or fill out our online form.
