Self-employed retirement plans Los Angeles, CA. The independence of running your own company in Los Angeles, CA is one of the greatest advantages of having a self-directed career. Even so, this independence can come with potential drawbacks, especially when it comes to building your retirement fund, as you don't have access to a workplace retirement plan. 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 financially stable retirement, seeking advice from a financial advisor in Los Angeles, CA to create your self-employed retirement plan offers significant tax advantages that enable you to move your business forward.
Few Los Angeles, CA investment consulting and retirement planning firms truly grasp the challenges faced by entrepreneurs as well as Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (learn more about our story here), and our firm have a rich history of supporting entrepreneurs with their retirement planning needs. We recognize that your goals for your business and retirement go far beyond basic numbers, and we work tirelessly to create personalized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Los Angeles, CA, or reach out to Correct Capital at 877-930-401k or contact us online to speak with a small business 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 offer immediate benefits today. Offering flexibility in contributions to substantial tax savings, partnering with a financial advisor in Los Angeles, CA enables you to customize your retirement plan to suit 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: Set aside more during successful years and cut back when your earnings dip, so that your plan works with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw without tax penalties in the future—a wise move if you expect your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, helping you keep more of your income.
- 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: Based on your location, you may be eligible for extra tax breaks as a self-employed individual. These state-level incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can take advantage of a 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
Creating a stable future isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across different asset classes like stocks and bonds is a smart way to mitigate financial risk while continuing to build your retirement fund.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business ensures you don’t dipping into savings during tough times and risking extra costs.
Plan for the Future of Your Los Angeles, CA Business
Retirement planning enables you to prepare for what’s next with your Los Angeles, CA business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and don’t transfer with the business. These accounts can provide the steady income you’ll need in the future. Remember that while selling a business often leads to a capital gain, retirement plan contributions are capped at annual limits (e.g., up to $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, including catch-up contributions, depending on plan details).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you might face when you transfer your business.
- Succession Planning: If you’re passing the business on, your retirement accounts provide a stable foundation during the change. You can also work with a financial advisor with expertise in succession and retirement planning to reduce taxes on the sale.
With the best-fit retirement strategy, you manage your financial future, cut down your tax obligations, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Los Angeles, CA Now?
Time is one of the most crucial factors for building your retirement fund. Starting early not only helps you grow a more substantial retirement fund but also lowers the financial burden of saving aggressively in the future. Here’s why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund could lead to a significant impact on the amount you’ll have when you reach retirement age. The primary reason is compound interest—the concept where your investments earn returns, and those returns, in turn, earn even more returns. The greater time span your money has to grow, the more significant the impact of compounding.
Example: Taylor and Alex are both self-employed professionals. Both of them want 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, using a projected 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently can lead to impressive growth. Consider this example 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 grow to approximately $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, all because of a 10-year delay.
The earlier you begin, the less you need to save each year to achieve 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. Annual deposits were multiplied by the number of years to estimate total contributions. This information is intended as illustrative examples and cannot predict actual future outcomes. Your individual results may differ based on factors such as market conditions, fees, and personal factors. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Los Angeles, CA, it can be tempting to put more emphasis on reinvesting in your business rather than saving for retirement. However, starting a plan now gives you the chance to:
- Benefit from tax-deferred growth or penalty-free withdrawals later on.
- Benefit from flexible contributions that align with your earnings.
- Create a long-term safety measure that provides security, no matter how your business changes.
Starting early, the less you’ll have to worry about making up for lost time later in life. Taking steps toward your retirement goals today means managing your financial future and allowing 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
Multiple retirement savings options open for those working for themselves in Los Angeles, CA, each offering its own pros and cons. A financial advisor can help you learn about the advantages and disadvantages of each choice and choose the one best suited for your unique situation. Typically, your self-employed retirement plan options in Los Angeles, 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, contributions are typically tax-deductible, and returns grow free of current taxes, but money taken out during retirement are taxed as income. In contrast, Roth IRA contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are exempt from taxes. In both types of accounts, withdrawals are penalty-free provided you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA offers a way to save for retirement that enables entrepreneurs to set aside a portion of their self-employment income. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) cannot make additional contributions beyond the 25% you (the employer) allocate. If you have employees, it's required 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. This type of plan works well for entrepreneurs facing cycles of high revenue and low revenue. Unlike other plans, SEP IRAs are free of expensive setup or ongoing fees.
SEPs work like conventional IRAs, where you contribute pre-tax dollars and withdrawals are taxed as income.
Eligibility: Any employer, including the self-employed can open 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: A Solo 401(k) plan, 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. This type of plan are similar to traditional employer-managed 401(k) plans, and enable contributions as both an employee or an employer with pre-tax money. This provides more savings than SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. With this type of plan, 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 may establish and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you can make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employed earnings, up to 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 individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your net earnings from self-employment, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 for those aged 50 and older (in 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 provides a fixed, predetermined benefit to business owners upon retirement. In contrast to the plans discussed earlier, this plan is not influenced by market performance, but enables participants to determine what they'll get in retirement. This plan is best suited for wealthier professionals who are focused on saving a substantial amount for retirement and are willing to make sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income upon retirement.
Eligibility: Any self-employed individual managing a one-person company or employing fewer than five people may establish an individual defined benefit plan, but it's generally recommended for those over 50 who make $250,000 or more annually. Typically, good candidates for defined benefit plans are:
- Business owners or partners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% with plans to contribute more
- Companies showing consistent profit patterns
- Partners or owners over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions is calculated by an actuary based on your financial situation, age, and savings targets. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Los Angeles, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Los Angeles, CA focused on self-employed retirement strategies is an essential partner for those working for themselves. They have the expertise to help understand the intricacies of saving for retirement and develop a customized plan that matches your objectives. An expert in your area will assess where you stand financially, identify your risk preferences, and assist you in making informed decisions about saving and investing for retirement. Included in what we do for you involves:
- Assist in selecting a plan that best fits your needs and goals
- Further adapt the plan to your needs even further
- Create a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Provide ongoing education and advice throughout your retirement planning process
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in Los Angeles, CA: Correct Capital's Process
Self-employed individuals in Los Angeles, CA who aren’t equipped with the time or understanding to handle their self-employed retirement plan themselves often feel overwhelmed when faced with their available plans. With Correct Capital, our Los Angeles, CA financial advisors take on the bulk of your retirement planning for you, working to make meeting your future savings targets as hassle-free as possible for you. We can help you get set up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: In just 20 minutes, a member of our advisor team can determine if our services align for you and your business. This brief introduction allows us to understand what you're looking for with no obligation or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll request information, including how many employees you have (if any), your existing financial picture, and your long-term savings targets. This enables us to craft a personalized strategy suited specifically for your needs.
- Review Your Plan: After we put together a plan based on the information you provide, we'll schedule a meeting and go over your plan thoroughly to ensure you understand it and understand how it best correlates to your needs.
- Implementation and Monitoring: When we finalize on your plan, we'll implement the necessary steps so you can initiate your savings journey. Throughout our relationship, we'll have regular meetings and review your strategy to ensure it stays suited to your needs.
Our Los Angeles, CA financial advisors and retirement plan consultants act as fiduciary advisors, which means they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Los Angeles, 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 Los Angeles, CA
You don't see your business as "just a business", and your Los Angeles, CA financial advisors should provide more than simply sound financial advice. At Correct Capital, we make it a priority to understand our clients and their businesses to create tailored self-employed retirement plans. To every client in Los Angeles, CA, we provide 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.
