Self-employed retirement plans Lexington, KY. The independence of running your own company in Lexington, KY offers many benefits of working for yourself. However, this flexibility sometimes brings with certain challenges, particularly when it comes to retirement savings, because you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from understanding their retirement options. In addition to enjoying a more secure retirement, partnering with a financial advisor in Lexington, KY to create your self-employed retirement plan offers significant tax advantages that allow you to move your business forward.
Few Lexington, KY wealth management and retirement planning firms truly grasp the challenges faced by small business owners as well as Correct Capital. Our founder's father was a small business owner himself (learn more about our story here), and we have a rich history of assisting business owners in their retirement planning needs. We understand that your business and retirement aspirations aren’t limited to basic numbers, and we strive to offer personalized solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in Lexington, KY, or call Correct Capital at 877-930-401k or contact us online to consult with a entrepreneurial financial advisor in Lexington, KY today.
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 deliver tangible benefits today. From flexible contributions to substantial tax savings, consulting a financial advisor in Lexington, KY helps you customize your retirement plan to align with your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, 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 high-income years and reduce savings when income is lower, ensuring your plan fits your current income.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw your savings tax-free down the road—a smart decision if you expect your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to compound.
- State-Specific Incentives: Based on your location, you could qualify for state-specific tax breaks as a business owner. These state-level incentives can make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 contributed a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement isn’t only about how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and alternatives can help reduce risk while helping to grow your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund prevents you from dipping into savings during financial hardships and facing tax penalties.
Plan for the Future of Your Lexington, KY Business
A thoughtful retirement strategy also helps you plan ahead for what’s next with your Lexington, KY business:
- Selling Your Business: If you’re planning to sell, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and won’t be included in the sale. These savings ensure the steady income you’ll need during retirement. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are subject to yearly maximums (e.g., as much as $7,000 for IRAs or up to $70,000 for Solo 401(k)s, factoring in catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you might face when you pass on your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts ensure the funds you need through the transition. You may also work with a financial advisor experienced in both succession and retirement strategies to minimize tax burdens associated with the transaction.
With the best-fit retirement strategy, you manage your financial future, lower your tax bill, and establish 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 crucial factors for building your retirement fund. Beginning sooner rather than later not only helps you grow 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
Delaying your retirement savings could lead to a major impact on the total you’ll have when you retire. The primary reason is compound interest—the concept where your investments generate earnings, and those returns, in turn, generate even more returns. The greater time span your money has to grow, the larger the benefit of this growth.
Example: Alex and Taylor are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to catch up.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and accumulates $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time may result in substantial growth. Take a look at this scenario showing the power of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $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, all because of a 10-year delay.
The earlier you begin, the less effort required each year to reach your retirement goals.
*These calculations are based on estimates generated with NerdWallet’s Compound Interest Calculator, based on a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. These examples are meant to provide general guidance and are not a promise of future results. Your individual results may differ due to elements like market conditions, fees, and individual circumstances. Always consult a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in Lexington, KY, it might seem easier to prioritize reinvesting in your business over saving for retirement. Even so, initiating a plan now allows you to:
- Leverage tax-free future growth or withdrawals without taxes later on.
- Enjoy contribution flexibility that adapt to your earnings.
- Establish a long-term safety measure that offers peace of mind, no matter how your business changes.
Getting started now, the less you’ll be required to worry about making up for lost time later in life. Saving for retirement now means managing your financial future and allowing yourself the freedom to turn your attention to your dreams—both for your golden years and your Lexington, KY business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options open for entrepreneurs in Lexington, KY, each offering its own advantages and considerations. A financial advisor will guide you to learn about the advantages and disadvantages of each option and choose the one ideal for your circumstances. Generally speaking, your self-employed retirement plan options in Lexington, KY include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that provide key tax perks. In a conventional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but withdrawals in retirement are taxable. In contrast, with Roth IRAs, you contribute from post-tax earnings, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both cases, withdrawals come without penalties as long as 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 remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that enables entrepreneurs to set aside a portion of their self-employment income. Contributions must come from 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 are obligated to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a fixed dollar figure or a percentage of wages to employee accounts. A SEP IRA is a good option for entrepreneurs facing fluctuating revenue streams. Unlike other plans, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs operate like traditional IRAs, where the contributions are tax-deferred 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 are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), also called an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan designed for businesses without 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 allows for more savings compared to SEPs or IRAs; however, the extra savings options often come with more restricted investment choices. 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: This plan is exclusively for 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 are allowed to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your earned income from self-employment, subject to the annual contribution limit. In 2025, those limits are $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 if you're over age 50 (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that delivers a pre-established payout to entrepreneurs upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know what they'll receive in retirement. This plan is ideal for higher-income self-employed individuals who aim to accumulate a significant sum for retirement and are prepared to contribute larger deposits. Contributions are tax deferred, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs running an owner-only 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 make $250,000 or more annually. In most cases, good candidates for defined benefit plans tend to be:
- Partners or owners who want to invest more than $70,000 (or $77,500 for those aged 50+)
- Businesses currently investing 3-4% and are willing to do more
- Businesses with proven consistent profit patterns
- Partners or owners over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The contribution limit requires calculation from an actuary determined by your income, age, and retirement goals. Limits on contributions are updated yearly.
The Importance of a Financial Advisor in Lexington, KY for Your Self-Employed Retirement Plan
Working with a financial advisor in Lexington, KY focused on self-employed retirement strategies can be an important asset for those working for themselves. They have the expertise to help understand the intricacies of saving for retirement and design a tailored strategy that aligns with your goals. An expert in your area will review your finances, identify your risk preferences, and help you in selecting the best options about saving and investing for retirement. Included in what we do for you features:
- Guide you in choosing a plan that suits your unique requirements
- Customize the plan to your needs even further
- Adopt a written plan in accordance with IRS guidelines
- 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
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in Lexington, KY: Correct Capital's Process
Entrepreneurs in Lexington, KY who aren’t equipped with the time or understanding to manage their own retirement planning themselves often feel overwhelmed as they look at their available plans. With Correct Capital, our Lexington, KY financial advisors handle the lion's share of your retirement strategy for you, and strive to ensure meeting your future savings targets as straightforward 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 a good fit for you and your business. This brief introduction allows us to learn about your needs with no obligation or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including how many employees you have (if any), your current financial situation, and your future objectives. This allows us to put together a tailored approach that aligns with your goals.
- Review Your Plan: When we finalize a plan based on 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 put everything in place so you can begin contributing. Throughout our relationship, we'll have regular meetings and review your strategy to keep it tailored to your evolving circumstances.
Our Lexington, KY financial advisors and retirement plan consultants are fiduciary advisors, meaning they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Lexington, KY 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 Lexington, KY
To you, your business is more than "just a business", and your Lexington, KY financial advisors must deliver more than just good financial guidance. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to provide personalized self-employed retirement plans. We offer all our Lexington, KY clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
