Self-employed retirement plans Lancaster, CA. The flexibility of being your own boss in Lancaster, CA offers many benefits of having a self-directed career. Even so, this independence often comes with potential drawbacks, especially in terms of planning for retirement, as you don't have the benefit of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from looking into other possibilities. In addition to achieving a more comfortable retirement, working with a financial advisor in Lancaster, CA to create your self-employed retirement plan offers significant tax advantages that help you to move your business forward.
Few Lancaster, CA financial advisory and retirement planning firms are as attuned to the requirements of entrepreneurs as well as 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 Correct Capital take pride in supporting entrepreneurs with their retirement planning needs. We recognize that your business and retirement aspirations extend well past basic numbers, and we are dedicated to create tailored solutions that reflect your objectives. Keep reading to learn more 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 entrepreneurial financial advisor in Lancaster, CA today.
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Why Lancaster, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide tangible benefits today. From flexible contributions to considerable tax savings, partnering with a financial advisor in Lancaster, CA enables you to customize your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) provides the flexibility to tailor how much you save:
- Customizable Contributions: Set aside more during profitable years and scale back when revenues are down, ensuring your plan works with your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw tax-free later—an advantageous choice if you believe your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans offer significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA lower your taxable income, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to compound.
- State-Specific Incentives: Depending on where you live, you may be eligible for extra tax breaks as a sole proprietor. These local incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 they contribute a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement isn’t only about how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across different stocks, bonds, and other assets is a smart way to minimize exposure to risk while still growing your savings.
- Emergency Back-Up: Supplementing your retirement savings with a business emergency fund ensures you don’t using your retirement funds during financial hardships and facing tax penalties.
Plan for the Future of Your Lancaster, CA Business
Retirement planning can assist you prepare for what’s next with your Lancaster, CA business:
- Selling Your Business: When selling your business, plans like SEP IRAs or Solo 401(k)s remain yours and don’t transfer with the business. These accounts ensure the steady income you’ll need during retirement. Remember that while selling your business results in a capital gain, retirement plan contributions are subject to yearly maximums (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you might face when you pass on your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts ensure a stable foundation during the change. You can also seek advice from a financial advisor experienced in both succession and retirement strategies to reduce taxes associated with the transaction.
With the proper savings strategy, you manage your financial future, cut down your tax obligations, and create a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Lancaster, CA Now?
Time is one of the most important resources for building your retirement fund. Starting early not only allows you to build a more substantial retirement fund but also lowers the pressure of playing catch-up as you get older. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings may cause a significant impact on the amount you’ll have when you retire. The biggest reason is compound interest—the powerful process where your investments earn returns, and those returns, subsequently, generate even more returns. The longer your money has to grow, the greater the effect of compounding.
Example: Two individuals, Alex and Taylor are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but contributes $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor invests $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time can lead to significant growth. Take a look at this scenario showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an projected return of 7%, you’ll end up with $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, just from a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*These calculations are estimates derived from NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. The scenarios provided are intended as illustrative examples and do not guarantee future performance. Your individual results may differ due to elements like market conditions, fees, and your unique situation. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
If you’re self-employed in Lancaster, CA, it is often the case that you focus more on reinvesting in your business instead of saving for retirement. That said, beginning a plan now allows you to:
- Take advantage of tax-deferred growth or withdrawals without taxes later on.
- Enjoy contribution flexibility that align with your income.
- Create a financial cushion that provides security, no matter how your business changes.
Starting early, the less you’ll be required to worry about making up for lost time later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the freedom to focus on your goals—both for your retirement years and your Lancaster, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for those working for themselves in Lancaster, CA, each providing its own pros and cons. A financial advisor can help you learn about the benefits and drawbacks of each option and identify the one ideal for your circumstances. Typically, your self-employed retirement plan options in Lancaster, CA are:
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 traditional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but money taken out during retirement are taxable. In contrast, Roth IRA contributions are made with after-tax income, but qualified withdrawals in retirement, including earnings, are not taxed. In both accounts, withdrawals are penalty-free provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, both traditional and Roth IRAs are open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA serves as a retirement savings option that permits those who are self-employed to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a self-employed individual, you (the employee) would not be able to contribute beyond the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. It's your choice whether to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan may be ideal for businesses that experience cycles of high revenue and low revenue. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs work like traditional IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan designed for businesses with no employees or when the sole employee is your spouse. This type of plan operate much like standard 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This allows for more savings compared to SEPs or IRAs; however, the additional opportunities may be offset by more restricted investment choices. 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: 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 have the ability to 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. For 2025, the limits will be $23,500, or $31,000 if you're over 50, or $34,750 for individuals aged 60-63 in 2025.
- Profit-sharing contributions (as an employer) are limited to 25% of your adjusted self-employment income, which is calculated as net profits less half of your self-employment tax and the employee contributions you made.
Your combined contributions must not surpass $70,000, or $77,500 if you're over age 50 (as of 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan represents a type of retirement plan that guarantees a fixed, predetermined benefit to self-employed individuals upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand what they'll receive in retirement. This option is ideal for wealthier professionals who are focused on saving a large amount for retirement and are prepared to contribute larger deposits. Contributions offer tax-deferred growth, and withdrawals incur taxes as income in retirement.
Eligibility: Self-employed professionals running an owner-only business or with less than five employees may establish an individual defined benefit plan, but it's typically recommended for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Business owners or partners 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
- Businesses that have demonstrated consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or boost savings within a short timeframe
Contribution Limits: The maximum allowable contribution must be determined by an actuary using your earnings, age, and retirement objectives. Allowable contributions change annually.
The Importance of a Financial Advisor in Lancaster, CA for Your Self-Employed Retirement Plan
Working with a financial advisor in Lancaster, CA specialized in self-employed retirement plans serves as an important asset for self-employed individuals. They bring the skills needed to navigate the complexities of retirement planning and craft a customized plan that reflects your aspirations. A financial advisor in Lancaster, CA will assess where you stand financially, identify your risk preferences, and help you in choosing wisely about saving and investing for retirement. A key part of what we do for you involves:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Customize the plan to your needs even further
- Create a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Review and modify your plan when necessary
- Offer continued financial education and guidance as you continue on the road to retirement
- Maximize what you receive in retirement by maximizing your social security benefits
Self-Employed Retirement Plans in Lancaster, CA: Correct Capital's Process
Self-employed individuals in Lancaster, CA who lack the time, interest, or knowledge to oversee their self-employed retirement plan themselves may end up overwhelmed by their available plans. With Correct Capital, our Lancaster, CA financial advisors take on the lion's share of your savings plan setup for you, to help make meeting your retirement goals as easy as possible for you. We will guide you in creating your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction allows us to 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 present financial standing, and your future objectives. This allows us to put together a custom plan suited specifically for your needs.
- Review Your Plan: After we put together a plan from the information you provide, we'll sit down with you and go over your plan step by step to help you fully grasp it and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll put everything in place so you can initiate your savings journey. Throughout our relationship, we'll check in and review your strategy to make sure it remains aligned with your goals.
Our Lancaster, CA financial advisors and retirement plan consultants act as fiduciary advisors, which means they are committed by law and ethics to prioritize your needs above all else.
Other financial advisory services we offer in Lancaster, CA include:
- 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 Lancaster, CA
To you, your business is more than "just a business", and your Lancaster, CA financial advisors need to offer more than simply sound financial advice. With Correct Capital, we make it a priority to understand our clients and their businesses to create customized self-employed retirement plans. All our clients in Lancaster, CA benefit from our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
