Self-employed retirement plans Louisville, KY. The independence of being your own boss in Louisville, KY is one of the best aspects of having a self-directed career. However, this freedom sometimes brings with potential drawbacks, notably regarding planning for retirement, since you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off exploring their options. In addition to having a more comfortable retirement, seeking advice from a financial advisor in Louisville, KY to create your self-employed retirement plan delivers significant tax advantages that allow both you and your business to thrive.
Few Louisville, KY investment consulting and retirement planning firms are as attuned to the requirements of small business owners quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (check out our story here), and Correct Capital have a rich history of helping businesses with their retirement planning needs. We recognize that your professional and personal aspirations go far beyond basic numbers, and we are dedicated to offer customized solutions to meet your unique goals. Keep reading to learn more about your self-employed retirement plan options in Louisville, KY, or give us a call at Correct Capital at 877-930-401k or contact us online to consult with a small business financial advisor in Louisville, KY today.
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Why Louisville, KY Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide immediate benefits today. From flexible contributions to substantial tax savings, partnering with a financial advisor in Louisville, KY enables you to customize your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) offers the freedom to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when revenues are down, so your plan aligns with your cash flow.
- Roth Options: Opting for 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 wise move if you believe your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed provide valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, so you can keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, providing your money more time to accumulate.
- State-Specific Incentives: In some states, you may be eligible for additional deductions as a business owner. These regional incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax 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
Building a secure retirement goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across varied 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 tapping into your nest egg during challenging periods and risking extra costs.
Plan for the Future of Your Louisville, KY Business
Preparing for retirement enables you to prepare for what’s next with your Louisville, 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 don’t transfer with the business. These savings ensure the financial stability you’ll need in the future. Keep in mind that while selling your business results in a capital gain, deposits into these plans are restricted by contribution limits (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you’ll owe when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts ensure financial security during the change. You can also seek advice from a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens on the sale.
With the right retirement plan, you manage your financial future, cut down your tax obligations, and establish a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Louisville, KY Now?
Time is one of the most valuable factors in retirement planning. Starting early not only allows you to build a larger nest egg but also reduces the stress of saving aggressively in the future. This is why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund may cause a significant impact on the amount you’ll have when you retire. The biggest reason is compound interest—the financial principle where your investments earn returns, and those returns, subsequently, earn even more returns. The more time your money has to grow, the more significant the benefit of this compounding process.
Example: Two individuals, 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 contributes $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 ends up with $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time may result in impressive growth. Here’s a simple scenario showing the power of compound interest:
- Starting at age 25: If you invest $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: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
Saving early, the less you need to save each year to reach your retirement goals.
*The numbers shown in this scenario represent estimates calculated using NerdWallet’s Compound Interest Calculator, based on a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. These examples are for illustrative purposes only and do not guarantee future performance. Actual results may vary based on factors such as market conditions, fees, and individual circumstances. Always consult a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Louisville, KY, it can be tempting to put more emphasis on reinvesting in your business instead of saving for retirement. That said, beginning a plan now gives you the chance to:
- Benefit from tax-deferred growth or penalty-free withdrawals in the future.
- Enjoy adjustable savings that align with your income.
- Create a safety net that offers peace of mind, 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. Saving for retirement now means managing your financial future and giving yourself the ability to focus on your goals—both for your golden years and your Louisville, KY business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for entrepreneurs in Louisville, KY, each with its own pros and cons. A financial advisor can help you understand the pros and cons of each option and choose the one best suited for your unique situation. Generally speaking, your self-employed retirement plan options in Louisville, KY are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that include key tax perks. In a traditional IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but withdrawals in retirement are taxable. In contrast, Roth IRA contributions from post-tax earnings, but retirement withdrawals that qualify, including earnings, are tax-free. In both accounts, withdrawals are penalty-free provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, 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: SEP IRAs offers a way to save for retirement that allows self-employed individuals to set aside a portion of their self-employment income. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) have designated. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You may choose to contribute a fixed dollar figure or a percentage of wages to employee accounts. This type of plan may be ideal for entrepreneurs facing fluctuating revenue streams. Compared to other retirement options, SEP IRAs don’t have costly startup or administrative fees.
SEPs work like traditional IRAs, where you contribute pre-tax dollars and money withdrawn is subject to income tax.
Eligibility: Both employers and 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
If you’re self-employed, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses with no employees or if the only employee is your spouse. These plans function similarly to employer-sponsored 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This provides more savings than SEPs or IRAs; however, the increased savings potential often come with more constrained investment avenues. Using a solo 401(k), you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you have the ability to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, capped at the annual contribution limit. For 2025, the limits will be $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 your net profit minus half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that guarantees a set amount to entrepreneurs upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand what they'll have in retirement. This plan is recommended for higher-income self-employed individuals who are focused on saving a significant sum for retirement and are willing to make sizeable contributions. Contributions offer tax-deferred growth, and withdrawals are taxable as income upon retirement.
Eligibility: Self-employed professionals running an owner-only business or employing fewer than five people may establish an individual defined benefit plan, but it's generally recommended for people above age 50 who generate a minimum of $250,000 yearly. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 for individuals 50 and older)
- Organizations that already put in 3-4% with plans to contribute more
- Organizations that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who wish to accelerate savings or boost savings within a short timeframe
Contribution Limits: The cap on contributions is calculated by an actuary using your financial situation, age, and savings targets. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Louisville, KY for Your Self-Employed Retirement Plan
A financial advisor in Louisville, KY specialized in self-employed retirement plans can be an essential partner for entrepreneurs. They have the expertise to help understand the intricacies of saving for retirement and develop a customized plan that reflects your aspirations. A financial advisor in Louisville, KY will assess where you stand financially, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. A key part of what we do for you includes:
- Guide you in choosing a plan that best fits your needs and goals
- Tailor the plan to fit you personally even further
- Create a written plan as required by IRS rules
- Organize a trust plan to manage your assets
- Help 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
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Louisville, KY: Correct Capital's Process
Entrepreneurs in Louisville, KY who aren’t equipped with the time or understanding to oversee their self-employed retirement plan independently often feel overwhelmed by their available plans. At Correct Capital, our Louisville, KY financial advisors manage the majority of your savings plan setup for you, to help make meeting your financial objectives as easy 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: A quick 20-minute call is all it takes, a member of our advisor team can help understand if our services align for you and your business. This initial call helps us learn about your needs with no pressure or major time investment on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including whether you have employees, your present financial standing, and your retirement goals. This allows us to put together a tailored approach that aligns with your goals.
- Review Your Plan: After we put together a plan using the information you provide, we'll sit down with you and review your plan thoroughly to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can begin contributing. Over the course of our partnership, we'll have regular meetings and monitor your plan to make sure it remains aligned with your goals.
Our Louisville, KY financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are committed by law and ethics to act in your best interest.
Other financial advisory services we offer in Louisville, 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 Louisville, KY
You don't see your business as "just a business", and your Louisville, KY financial advisors should provide more than just good financial guidance. With Correct Capital, we make it a priority to understand our clients and their businesses to provide customized self-employed retirement plans. All our clients in Louisville, KY benefit from our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
