Self-employed retirement plans Lexington, KY. The independence of being your own boss in Lexington, KY is one of the greatest advantages of being self-employed. However, this independence often comes with a lack of security, especially regarding planning for retirement, because you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many should consider looking into other possibilities. In addition to achieving a more comfortable retirement, seeking advice from a financial advisor in Lexington, KY to establish your self-employed retirement plan can provide significant tax advantages that help both you and your business to thrive.
Few Lexington, KY wealth management and retirement planning firms understand the needs of entrepreneurs as well as Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and we take pride in helping businesses with their retirement planning needs. We recognize that your professional and personal aspirations go far beyond simple financial figures, 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 Lexington, KY, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Lexington, KY today.
Schedule a Meeting With an Advisor Today
Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
Schedule a 15-Minute Introductory Call
Why Lexington, KY Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also offer immediate benefits today. From flexible contributions to substantial tax savings, partnering with a financial advisor in Lexington, KY helps you design your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) offers the freedom to modify how much you save:
- Customizable Contributions: Contribute more during profitable years and cut back when income is lower, so your plan works with your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw tax-free later—a wise move if you believe your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, which gives your money more time to grow.
- State-Specific Incentives: Depending on where you live, you could qualify for extra deductions as a sole proprietor. These local incentives make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, cutting down 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: Spreading your investments across varied stocks, bonds, and alternatives serves to reduce risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net helps you avoid using your retirement funds during challenging periods and risking extra costs.
Plan for the Future of Your Lexington, KY Business
A thoughtful retirement strategy enables you to plan ahead for what’s next with your Lexington, KY business:
- Selling Your Business: If you’re planning to sell, plans like SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These savings ensure the steady income you’ll need in the future. Remember that while selling a business often leads to a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you might face when you sell your business.
- Succession Planning: If you’re passing the business on, your nest egg ensure the funds you need through the transition. You can also partner with a financial advisor experienced in both succession and retirement strategies to reduce taxes on the sale.
With the best-fit retirement strategy, you can take control of your financial future, reduce your tax burden, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Lexington, KY Now?
There’s no denying that time is one of the most important assets for building your retirement fund. Getting a head start not only allows you to build a more substantial retirement fund but also reduces the stress of catching up later in life. This is why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings may cause a major impact on the savings you’ll have when you stop working. The primary reason is compound interest—the financial principle where your investments earn returns, and those returns, in turn, accumulate even more returns. The more time your money has to grow, the more significant the effect of compounding.
Example: Two individuals, Alex and Taylor are both self-employed professionals. Both of them want to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but puts away $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex puts in $180,000 and accumulates $691,184.39*.
- Taylor puts in $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily often create substantial growth. Consider this example showing the impact of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an expected yearly growth rate 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 gap of over $260,000, just from a 10-year delay.
Starting sooner, the less you need to save each year to reach your retirement goals.
*The figures provided in this example are based on estimates generated with NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. This information is meant to provide general guidance and cannot predict actual future outcomes. Outcomes may change based on factors such as market conditions, fees, and individual circumstances. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
If you’re self-employed in Lexington, KY, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. Even so, initiating a plan now gives you the chance to:
- Take advantage of tax-free future growth or withdrawals without taxes down the road.
- Enjoy contribution flexibility that adapt to your income.
- Build a financial cushion that provides security, no matter how your business develops.
The sooner you start, the less you’ll have to worry about making up for lost time later in life. Taking steps toward your retirement goals today means taking control of your financial future and allowing yourself the freedom to turn your attention to your goals—both for your future retirement and your Lexington, KY business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for those working for themselves in Lexington, KY, each with its own pros and cons. A financial advisor can help you understand the benefits and drawbacks of each choice and identify the one most suitable for your unique situation. Generally speaking, your self-employed retirement plan options in Lexington, KY consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that offer key tax perks. In a traditional IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but retirement distributions are subject to income tax. In contrast, with Roth IRAs, you contribute using income already taxed, but qualified withdrawals in retirement, including earnings, are tax-free. In both cases, withdrawals come without penalties as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are accessible for individuals with an earned income.
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: SEP IRAs serves as a retirement savings option that enables entrepreneurs to contribute a percentage of their net earnings. Contributions must come from an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role 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 have the flexibility 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 periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs are free of costly startup or administrative fees.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Both employers and self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the allowable contribution 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 companies that have no employees or when the sole employee is your spouse. These plans are similar to employer-sponsored 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This allows for more savings than SEPs or IRAs; however, the increased savings potential may be offset by more restricted investment choices. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which offer 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: If you are self-employed with a solo 401(k) plan, you are allowed 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. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (as of 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that guarantees a set amount to business owners upon retirement. Unlike defined contribution plans mentioned above, investment returns don’t affect the payout, but allows self-employed individuals to know what they'll receive in retirement. This strategy is best suited for higher-income entrepreneurs who are focused on saving a substantial amount for retirement and can commit to making sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income upon retirement.
Eligibility: Self-employed professionals operating a solo business or employing fewer than five people are eligible to open an individual defined benefit plan, but it's generally advised for people above age 50 who make $250,000 or more annually. In most cases, good candidates for defined benefit plans tend to be:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Businesses that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The contribution limit must be determined by an actuary using your earnings, age, and retirement objectives. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Lexington, KY for Your Self-Employed Retirement Plan
Partnering with an advisor in Lexington, KY specialized in self-employed retirement plans serves as an invaluable resource for those working for themselves. They have the expertise to help navigate the complexities of retirement planning and design a tailored strategy that matches your objectives. A financial advisor in Lexington, KY will assess where you stand financially, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you includes:
- Guide you in choosing a plan that suits your unique requirements
- Further adapt the plan to fit you personally even further
- Create a written plan that complies with IRS regulations
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Deliver continuous support and financial insights throughout your retirement planning process
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Lexington, KY: Correct Capital's Process
Lexington, KY business owners who aren’t equipped with the time or understanding to handle their retirement savings strategy independently often feel overwhelmed when faced with their options. At Correct Capital, our Lexington, KY financial advisors take on the majority of your retirement planning for you, and strive to ensure meeting your future savings targets as hassle-free as possible for you. We will guide you in creating your self-employed retirement plan in just four steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team will assess if we're a good fit for you and your business. This short conversation allows us to learn about your needs with no obligation or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll gather information, including how many employees you have (if any), your current financial situation, and your retirement goals. This allows us to put together a tailored approach suited specifically for your needs.
- Review Your Plan: When we finalize a plan based on the information you provide, we'll schedule a meeting and go over your plan step by step 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 set everything up so you can start saving. Throughout our relationship, we'll have regular meetings and track your progress to make sure it remains aligned with your goals.
Our Lexington, KY financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Lexington, KY 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 Lexington, KY
To you, your business is more than "just a business", and your Lexington, KY financial advisors need to offer more than basic financial recommendations. With Correct Capital, we focus on building a relationship with our clients and their businesses to create personalized self-employed retirement plans. We offer all our Lexington, KY clients our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To get started on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
