Self-employed retirement plans Lancaster, CA. The flexibility of running your own company in Lancaster, CA is one of the best aspects of having a self-directed career. However, this independence can come with certain challenges, notably when it comes to building your retirement fund, as you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off looking into other possibilities. In addition to enjoying a more secure retirement, working with a financial advisor in Lancaster, CA to create your self-employed retirement plan delivers significant tax advantages that help your business to grow and succeed.
Few Lancaster, CA wealth management and retirement planning firms truly grasp the challenges faced by small business owners quite like Correct Capital. Our founder's father was a small business owner himself (read more of our story here), and Correct Capital have a rich history of supporting entrepreneurs with their retirement planning needs. We recognize that your business and retirement aspirations aren’t limited to just monetary concerns, and we work tirelessly to provide personalized solutions aligned with your vision. Read on to discover about your self-employed retirement plan options in Lancaster, CA, or give us a call at Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Lancaster, CA today.
Why Lancaster, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide immediate benefits today. Offering flexibility in contributions to significant tax savings, consulting a financial advisor in Lancaster, CA allows you to create your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) gives you the option to modify how much you save:
- Customizable Contributions: Set aside more during high-income years and scale back when your earnings dip, so your plan works with your current income.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw tax-free later—a wise move if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, so you can keep more of your earnings.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to grow.
- State-Specific Incentives: Depending on where you live, you could qualify for additional credits as a self-employed individual. These regional incentives make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of stocks, bonds, and alternatives is a smart way to reduce risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a financial buffer for your business helps you avoid dipping into savings during financial hardships and incurring penalties.
Plan for the Future of Your Lancaster, CA Business
Preparing for retirement can assist you think through what’s next with your Lancaster, CA business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These accounts offer the steady income you’ll need later on. It’s important to note that while selling a business often leads to a capital gain, contributions to retirement accounts are capped at annual limits (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings can reduce the taxes you’ll owe when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts provide the funds you need as you make this shift. You might want to seek advice from a financial advisor experienced in both succession and retirement strategies to help with taxes associated with the transaction.
With the proper savings strategy, you gain control over 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 Lancaster, CA Now?
Time remains one of the most valuable factors when it comes to saving for retirement. Getting a head start not only lets you accumulate a larger nest egg but also reduces the financial burden of saving aggressively in the future. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings may cause a major impact on the total you’ll have when you stop working. The main reason is compound interest—the concept where your investments earn returns, and those returns, then, earn even more returns. The more time your money has to grow, the larger the benefit of this compounding process.
Example: Taylor and Alex are both self-employed professionals. They each aim 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 contributes $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments made consistently can lead to substantial growth. Here’s a simple scenario showing the effect of consistent growth:
- Starting at age 25: If you invest $200 per month in a retirement plan with an average annual return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month leaves you with only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the lower your annual savings needs each year to achieve your retirement goals.
*The numbers shown in this scenario are estimates generated with NerdWallet’s Compound Interest Calculator, based on a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. These examples are meant to provide general guidance and cannot predict actual future outcomes. Actual results may vary due to elements like market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in Lancaster, CA, it can be tempting to prioritize reinvesting in your business instead of saving for retirement. Even so, initiating a plan now enables you to:
- Benefit from growth that is tax-deferred or penalty-free withdrawals down the road.
- Benefit from flexible contributions that change with your income.
- Establish a long-term safety measure that provides security, no matter how your business evolves.
Getting started now, the less you’ll be required to worry about catching up later in life. Taking steps toward your retirement goals today means gaining control over your financial future and creating for yourself the ability to turn your attention to your objectives—both for your retirement years and your Lancaster, CA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for self-employed individuals in Lancaster, CA, each with its own advantages and considerations. A financial advisor can help you evaluate the pros and cons of each plan and choose the one most suitable for your circumstances. In most cases, your self-employed retirement plan options in Lancaster, CA consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that provide distinct tax benefits. In a traditional IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but retirement distributions are taxed as income. In contrast, Roth IRAs require contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are not taxed. In both types of accounts, withdrawals don’t incur penalties if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are open to those with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that enables entrepreneurs to contribute a percentage of their net earnings. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) would not be able to contribute above 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 may choose to contribute a fixed dollar figure or a percentage of wages to employee accounts. A SEP IRA may be ideal for businesses that experience periods of inconsistent earnings. Compared to other retirement options, SEP IRAs are free of expensive setup or ongoing fees.
SEPs operate like traditional IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan intended for businesses with no employees or where the only employee is a spouse. Solo 401(k)s function similarly to traditional employer-managed 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the extra savings options often come with more limited investment options. Using a solo 401(k), 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 have the ability to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employment income, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 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.
Your combined contributions must not surpass $70,000, or $77,500 for individuals aged 50+ (as of 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that delivers a set amount to self-employed individuals upon retirement. In contrast to the plans discussed earlier, investment returns don’t affect the payout, but lets individuals clearly understand what they'll get in retirement. This option is best suited for higher-income entrepreneurs who are focused on saving a large amount for retirement and are willing to make larger deposits. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income in retirement.
Eligibility: Entrepreneurs operating a solo business or with less than five employees are eligible to open an individual defined benefit plan, but it's typically suggested for individuals aged 50+ who generate a minimum of $250,000 yearly. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% with plans to contribute more
- Companies that have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The cap on contributions is calculated by an actuary using your income, age, and retirement goals. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Lancaster, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Lancaster, CA focused on self-employed retirement strategies is an invaluable resource for entrepreneurs. They bring the skills needed to understand the intricacies of saving for retirement and design a customized plan that aligns with your goals. An expert in your area will review your finances, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you features:
- Help you choose a plan that suits your unique requirements
- Further adapt the plan to your needs even further
- Create a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Review and modify your plan as needed
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in Lancaster, CA: Correct Capital's Process
Self-employed individuals in Lancaster, CA who don’t have the time or expertise to manage their own retirement planning on their own can become overwhelmed as they look at their options. Through our team at Correct Capital, our Lancaster, CA financial advisors handle the lion's share of your retirement strategy for you, working to make meeting your future savings targets 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 will assess if we're a good fit for you and your business. This initial call helps us learn about your needs with zero commitment or extensive time commitment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including your employee count, your existing financial picture, 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 using the information you provide, we'll sit down with you and review your plan in detail to help you fully grasp it and understand how it best correlates to your needs.
- Implementation and Monitoring: Once we've agreed on your plan, we'll implement the necessary steps so you can initiate your savings journey. Over the course of our partnership, we'll check in and monitor your plan to keep it tailored to your evolving circumstances.
Our Lancaster, CA financial advisors and retirement plan consultants are fiduciary advisors, meaning they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Lancaster, CA 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 Lancaster, CA
To you, your business is more than "just a business", and your Lancaster, CA financial advisors should provide more than simply sound financial advice. With Correct Capital, we make it a priority to understand our clients and their businesses to create personalized self-employed retirement plans. All our clients in Lancaster, CA benefit from our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To begin on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
