Self-employed retirement plans Los Angeles, CA. The freedom of owning your own business in Los Angeles, CA is one of the greatest advantages of having a self-directed career. Even so, this independence sometimes brings with potential drawbacks, notably regarding retirement savings, as 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 achieving a more comfortable retirement, seeking advice from a financial advisor in Los Angeles, CA to create your self-employed retirement plan can provide significant tax advantages that help your business to grow and succeed.
Few Los Angeles, CA wealth management and retirement planning firms truly grasp the challenges faced by self-employed individuals quite like Correct Capital. Our founder's father was a small business owner himself (check out our story here), and Correct Capital take pride in helping businesses with their retirement planning needs. We understand that your business and retirement aspirations extend well past just monetary concerns, and we work tirelessly to offer tailored solutions to meet your unique goals. Keep reading to learn more 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 consult with a entrepreneurial financial advisor in Los Angeles, CA today.
Why Los Angeles, 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 real benefits today. With customizable contribution options to considerable tax savings, consulting a financial advisor in Los Angeles, CA helps you design your retirement plan to suit your specific needs.
Flexibility That Fits Your Income
When your earnings vary over time, a plan like a SEP IRA or Solo 401(k) offers the freedom to adjust how much you save:
- Customizable Contributions: Save extra during successful years and reduce savings when income is lower, so that your plan fits your financial situation.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw tax-free later—an advantageous choice if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, helping you keep more of your income.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to grow.
- State-Specific Incentives: Based on your location, you may be eligible for state-specific credits as a self-employed individual. These local incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can take advantage of a credit of up to 50% of the first $2,000 put into a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future goes beyond just 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 nest egg.
- Emergency Back-Up: Pairing your retirement plan with a financial buffer for your business helps you avoid using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Los Angeles, CA Business
Preparing for retirement can assist you think through what’s next with your Los Angeles, CA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and are not part of the sale. These savings ensure the financial stability you’ll need during retirement. It’s important to note that while selling your business results in a capital gain, retirement plan contributions are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or a maximum of $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 sell your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts provide the funds you need as you make this shift. You can also seek advice from a financial advisor with expertise in succession and retirement planning to help with taxes during the sale.
With the right retirement plan, you manage your financial future, reduce your tax burden, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Los Angeles, CA Now?
Time remains one of the most valuable factors in retirement planning. Starting early not only allows you to build a larger nest egg but also lowers the pressure of playing catch-up as you get older. Here’s why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings may cause a substantial impact on the amount you’ll have when you reach retirement age. The primary reason is compound interest—the powerful process where your investments earn returns, and those returns, then, generate even more returns. The more time your money has to grow, the more significant the effect of this compounding process.
Example: Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor waits until age 40 but saves $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex invests $180,000 and achieves a total of $691,184.39*.
- Taylor contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments invested steadily often create impressive growth. Take a look at this scenario showing the effect of compounding:
- Starting at age 25: By investing $200 per month in a retirement plan with an average annual return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, all because of a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example represent estimates calculated using 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. The scenarios provided are intended as illustrative examples and are not a promise of future results. Actual results may vary based on variables including market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Los Angeles, CA, it might seem easier to focus more on reinvesting in your business rather than saving for retirement. Even so, beginning a plan now allows you to:
- Leverage tax-free future growth or penalty-free withdrawals down the road.
- Benefit from flexible contributions that adapt to your earnings.
- Establish a financial cushion that provides security, no matter how your business changes.
Getting started now, the less you’ll have to worry about making up for lost time later in life. Saving for retirement now means taking control of your financial future and allowing yourself the freedom to concentrate on your goals—both for your retirement years and your Los Angeles, CA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for self-employed individuals in Los Angeles, CA, each providing its own advantages and considerations. A financial advisor can help you learn about the advantages and disadvantages of each option and choose the one most suitable for your circumstances. In most cases, your self-employed retirement plan options in Los Angeles, CA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that offer distinct tax benefits. In a conventional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxed as income. In contrast, Roth IRA contributions using income already taxed, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both cases, 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 taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $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 allows those who are self-employed to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a sole proprietor, you (the employee) would not be able to contribute beyond the 25% you (the employer) have designated. If you have employees, you must contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan is a good option for businesses that experience cycles of high revenue and low revenue. In contrast to some alternatives, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs operate like standard IRAs, where the contributions are tax-deferred and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals 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
As a self-employed person, the contribution you can make 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 savings option for the self-employed intended for businesses with no employees or when the sole employee is your spouse. Solo 401(k)s operate much like standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This provides more savings than SEPs or IRAs; however, the extra savings options may be offset by more constrained investment avenues. 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: Only 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 are allowed to 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. The contribution limits for 2025 include $23,500, or $31,000 if you're over 50, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (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 employee contributions you made.
The total contribution cannot exceed $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan offers a structured retirement solution that delivers a fixed, predetermined benefit to self-employed individuals upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know the precise amount they'll have in retirement. This option is ideal for high-earning professionals who are focused on saving a substantial amount for retirement and can commit to making substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income in retirement.
Eligibility: Any self-employed individual running an owner-only business or with a small staff of under five are eligible to open an individual defined benefit plan, but it's typically recommended for those over 50 who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% and are willing to do more
- Companies with proven consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The maximum allowable contribution is calculated by an actuary determined by your income, age, and retirement goals. Allowable contributions change annually.
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 serves as an essential partner for those working for themselves. They bring the skills needed to navigate the complexities of retirement planning and develop a customized plan that aligns with your goals. A financial advisor in Los Angeles, CA will evaluate your financial situation, identify your risk preferences, and help you in making informed decisions about saving and investing for retirement. Part of what we do for you involves:
- Guide you in choosing a plan that best fits your needs and goals
- Further adapt the plan to fit you personally even further
- Formalize a plan in writing 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 when necessary
- Provide ongoing education and advice to help you navigate your retirement journey
- Boost your retirement earnings by maximizing your social security benefits
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 oversee their self-employed retirement plan independently may end up overwhelmed as they look at their options. With Correct Capital, our Los Angeles, CA financial advisors handle the majority of your retirement strategy for you, and strive to ensure meeting your retirement goals 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 determine if our services align for you and your business. This brief introduction allows us to learn about your needs with no obligation or significant effort 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 designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll sit down with you and go over your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: When we finalize on your plan, we'll put everything in place so you can initiate your savings journey. Over the course of our partnership, we'll meet with you and track your progress to keep it tailored to your evolving circumstances.
Our Los Angeles, CA financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in Los Angeles, CA include:
- Family Wealth Planning
- 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
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 should provide more than simply sound financial advice. Correct Capital takes pride in, we focus on building a relationship with our clients and their businesses to deliver personalized self-employed retirement plans. All our clients in Los Angeles, CA benefit from our I.O.U. promise: all guidance we provide 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.
