Self-employed retirement plans Los Angeles, CA. The independence of running your own company in Los Angeles, CA offers many benefits of being self-employed. However, this independence can come with potential drawbacks, notably in terms of building your retirement fund, as you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from exploring their options. In addition to achieving a financially stable retirement, working with a financial advisor in Los Angeles, CA to establish your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Los Angeles, CA financial advisory and retirement planning firms truly grasp the challenges faced by self-employed individuals as well as Correct Capital. Our founder's father was a small business owner himself (read more of our story here), and Correct Capital are deeply experienced in assisting business owners in their retirement planning needs. We understand that your business and retirement aspirations aren’t limited to just monetary concerns, and we are dedicated to provide tailored solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in Los Angeles, CA, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a entrepreneurial financial advisor in Los Angeles, CA today.
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Why Los Angeles, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver real benefits today. From flexible contributions to significant tax savings, consulting a financial advisor in Los Angeles, CA allows you to design your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) offers the option to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when revenues are down, so that your plan aligns with your cash flow.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw your savings tax-free down the road—a smart decision if you anticipate your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, helping you keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you might access additional deductions as a sole proprietor. These local incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 contributed a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across different asset classes like stocks and bonds serves to reduce risk while helping to grow your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net prevents you from tapping into your nest egg during financial hardships and incurring penalties.
Plan for the Future of Your Los Angeles, CA Business
A thoughtful retirement strategy enables you to plan ahead for what’s next with your Los Angeles, CA business:
- Selling Your Business: If you’re planning to sell, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and don’t transfer with the business. These plans ensure the reliable income you’ll need in the future. Keep in mind that while the sale of a business usually creates a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., as much as $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you’ll owe when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts ensure the funds you need through the transition. You may also partner with a financial advisor experienced in both succession and retirement strategies to help with taxes during the sale.
With the right retirement plan, you manage your financial future, reduce your tax burden, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Los Angeles, CA Now?
There’s no denying that time is one of the most crucial resources for building your retirement fund. Getting a head start not only allows you to build a larger nest egg but also reduces the stress of catching up later in life. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement could lead to a major impact on the amount you’ll have when you stop working. The main reason is compound interest—the concept where your investments grow, and those returns, in turn, earn even more returns. The more time your money has to grow, the greater the effect of compounding.
Example: Alex and Taylor are both entrepreneurs. Their shared goal is to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but contributes $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time often create impressive growth. Here’s a simple scenario showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
The earlier you begin, the less effort required each year to reach your retirement goals.
*The numbers shown in this scenario represent estimates calculated using NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. These examples are intended as illustrative examples and do not guarantee future performance. Outcomes may change based on variables including market conditions, fees, and your unique situation. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Los Angeles, CA, it might seem easier to prioritize reinvesting in your business rather than saving for retirement. Even so, starting a plan now allows you to:
- Benefit from tax-deferred growth or penalty-free withdrawals in the future.
- Benefit from adjustable savings that change with your cash flow.
- Establish a long-term safety measure that ensures stability, no matter how your business evolves.
The sooner you start, 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 gaining control over your financial future and giving yourself the opportunity to turn your attention to your dreams—both for your golden years and your Los Angeles, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for entrepreneurs in Los Angeles, CA, each with its own benefits and trade-offs. A financial advisor can help you understand the benefits and drawbacks of each plan and identify the one best suited for your needs. In most cases, your self-employed retirement plan options in Los Angeles, CA are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that provide specific tax advantages. In a standard IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but money taken out during retirement are subject to income tax. In contrast, Roth IRAs require contributions are made with after-tax income, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both types of accounts, withdrawals come without penalties if you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, traditional and Roth IRAs are open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs is a retirement plan that permits self-employed individuals to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) would not be able to contribute above the 25% you (the employer) already contributed. If you have employees, it's required to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a fixed dollar figure or a percentage of wages to employee accounts. A SEP IRA is a good option for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs lack costly startup or administrative fees.
SEPs function like conventional IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Both employers and 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
If you’re self-employed, 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 savings option for the self-employed intended for businesses without employees or if the only employee is your spouse. These plans function similarly to employer-sponsored 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This allows for more savings compared to SEPs or IRAs; however, the increased savings potential often come with more limited investment options. Using a solo 401(k), 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: For self-employed individuals 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 earned income from self-employment, capped at the annual contribution limit. The contribution limits for 2025 include $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 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+ (in 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that delivers a fixed, predetermined benefit to self-employed individuals upon retirement. In contrast to the plans discussed earlier, this plan is not influenced by market performance, but lets individuals clearly understand exactly how much they'll have in retirement. This plan is recommended for higher-income professionals who aim to accumulate a large amount for retirement and can commit to making substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income upon retirement.
Eligibility: Any self-employed individual operating a solo business or with less than five employees may establish an individual defined benefit plan, but it's generally advised for people above age 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans tend to be:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Organizations with proven consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or boost savings within a short timeframe
Contribution Limits: The cap on contributions is calculated by an actuary determined by your earnings, age, and retirement objectives. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Los Angeles, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Los Angeles, CA specialized in self-employed retirement plans is an essential partner for those working for themselves. They bring the skills needed to understand the intricacies of saving for retirement and craft a customized plan that reflects your aspirations. A financial advisor in Los Angeles, CA will review your finances, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. Included in what we do for you involves:
- Help you choose a plan that suits your unique requirements
- Tailor the plan to your needs even further
- Create a written plan as required by IRS rules
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Review and modify your plan as needed
- Deliver continuous support and financial insights as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Los Angeles, CA: Correct Capital's Process
Entrepreneurs in Los Angeles, CA who don’t have the time or expertise to manage their self-employed retirement plan independently often feel overwhelmed by their choices. With Correct Capital, our Los Angeles, CA financial advisors manage the lion's share of your retirement strategy for you, and strive to ensure meeting your financial objectives 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 can determine if we're suited to your needs for you and your business. This initial call allows us to get a sense of your goals with no obligation or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including your employee count, your present financial standing, and your future objectives. This helps us create a personalized strategy that aligns with your goals.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll meet with you and review your plan in detail to make sure it's clear and understand how it best correlates to your needs.
- Implementation and Monitoring: When we finalize on your plan, we'll put everything in place so you can start saving. Over the course of our partnership, we'll check in and monitor your plan to make sure it remains aligned with your goals.
Our Los Angeles, CA 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 Los Angeles, CA include:
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 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 Los Angeles, CA
To you, your business is more than "just a business", and your Los Angeles, CA financial advisors need to offer more than basic financial recommendations. Correct Capital takes pride in, we make it a priority to understand our clients and their businesses to provide tailored self-employed retirement plans. We offer all our Los Angeles, CA clients our I.O.U. promise: everything we recommend 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.
