Self-employed retirement plans Lubbock, TX. The flexibility of running your own company in Lubbock, TX is one of the greatest advantages of having a self-directed career. Even so, this flexibility often comes with certain challenges, especially when it comes to building your retirement fund, because you don't have the benefit of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off understanding their retirement options. In addition to having a more secure retirement, seeking advice from a financial advisor in Lubbock, TX to establish your self-employed retirement plan offers significant tax advantages that help you to move your business forward.
Few Lubbock, TX investment consulting and retirement planning firms are as attuned to the requirements of self-employed individuals quite like Correct Capital. Our founder's father was a small business owner himself (check out our story here), and our firm are deeply experienced in supporting entrepreneurs with their retirement planning needs. We understand that your business and retirement aspirations go far beyond basic numbers, and we work tirelessly to provide customized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Lubbock, TX, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Lubbock, TX today.
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Why Lubbock, TX Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also deliver real benefits today. With customizable contribution options to considerable tax savings, partnering with a financial advisor in Lubbock, TX allows you to customize your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income over time, 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 scale back when revenues are down, so your plan fits your financial situation.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, allowing you to withdraw tax-free later—a smart decision if you believe your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans provide valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, 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: In some states, you might access state-specific deductions as a self-employed individual. These local incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements 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
Planning for a safe retirement isn’t only about how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across different asset classes like stocks and bonds serves to reduce risk while continuing to build your savings.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund ensures you don’t dipping into savings during financial hardships and facing tax penalties.
Plan for the Future of Your Lubbock, TX Business
A thoughtful retirement strategy can assist you plan ahead for what’s next with your Lubbock, TX business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s stay in your name and don’t transfer with the business. These savings ensure the reliable income you’ll need later on. It’s important to note that while selling a business often leads to a capital gain, retirement plan contributions are subject to yearly maximums (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: Making the most of retirement savings helps lower the taxes you’ll owe when you sell your business.
- Succession Planning: For those winding down or handing over their business, your nest egg provide a stable foundation as you make this shift. You may also partner with a financial advisor with expertise in succession and retirement planning to help with taxes during the sale.
With the best-fit retirement strategy, you manage your financial future, lower your tax bill, and build a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Lubbock, TX Now?
There’s no denying that time is one of the most crucial factors for building your retirement fund. Getting a head start not only lets you accumulate a more substantial retirement fund but also minimizes the pressure of saving aggressively in the future. This is why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings can have a major impact on the amount you’ll have when you retire. The biggest 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 this compounding process.
Example: Taylor and Alex are both entrepreneurs. Their shared goal is to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor delays savings until age 40 but saves $7,500 annually to catch up.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time may result in significant growth. Here’s a simple scenario showing the effect of consistent growth:
- Starting at age 25: If you invest $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: Contributing the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
The earlier you begin, the less you need to save each year to reach your retirement goals.
*The figures provided in this example are estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. The scenarios provided are for illustrative purposes only and cannot predict actual future outcomes. Your individual results may differ depending on elements like market conditions, fees, and individual circumstances. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Lubbock, TX, it might seem easier to prioritize reinvesting in your business instead of saving for retirement. Even so, starting a plan now enables you to:
- Take advantage of tax-free future growth or tax-free withdrawals down the road.
- Enjoy contribution flexibility that align with your earnings.
- Create a long-term safety measure that provides security, no matter how your business evolves.
Getting started now, the less you’ll need to worry about catching up later in life. Saving for retirement now means managing your financial future and creating for yourself the ability to concentrate on your objectives—both for your golden years and your Lubbock, TX business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for self-employed individuals in Lubbock, TX, 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 unique situation. Typically, your self-employed retirement plan options in Lubbock, TX include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that include specific tax advantages. In a traditional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but withdrawals in retirement are subject to income tax. In contrast, Roth IRAs require contributions are made with after-tax income, but retirement withdrawals that qualify, including earnings, are not taxed. In both accounts, withdrawals are penalty-free as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that allows those who are self-employed to contribute a percentage of their net earnings. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions beyond 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. You may choose to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA may be ideal for businesses that experience fluctuating revenue streams. In contrast to some alternatives, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs function like standard IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed can set up 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), also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed intended for companies that have no employees or where the only employee is a spouse. Solo 401(k)s are similar to traditional employer-managed 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This allows for more savings than SEPs or IRAs; however, the increased savings potential can be balanced by more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals 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-employment income, subject to 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.
- Contributions as an employer (as an employer) must not surpass 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.
Your combined contributions must not surpass $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: Defined benefit plans represents a type of retirement plan that guarantees a fixed, predetermined benefit to entrepreneurs upon retirement. In contrast to the plans discussed earlier, investment returns don’t affect the payout, but enables participants to determine the precise amount they'll have in retirement. This plan is recommended for high-earning self-employed individuals who are focused on saving a substantial amount for retirement and are prepared to contribute substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income upon retirement.
Eligibility: Self-employed professionals operating a solo business or employing fewer than five people may establish an individual defined benefit plan, but it's most commonly advised 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% but are open to increasing contributions
- Businesses with proven consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions requires calculation from an actuary based on your earnings, age, and retirement objectives. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Lubbock, TX for Your Self-Employed Retirement Plan
Partnering with an advisor in Lubbock, TX experienced with retirement plans for the self-employed is an invaluable resource for self-employed individuals. They offer the knowledge to assist understand the intricacies of saving for retirement and design a personalized approach that aligns with your goals. An expert in your area will assess where you stand financially, determine how much risk you’re comfortable with, and assist you in choosing wisely 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
- Tailor 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
- Help you understand the plan's terms
- Track and fine-tune your plan when necessary
- 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 Lubbock, TX: Correct Capital's Process
Lubbock, TX business owners who lack the time, interest, or knowledge to manage their retirement savings strategy on their own often feel overwhelmed as they look at their choices. At Correct Capital, our Lubbock, TX financial advisors take on the bulk of your savings plan setup for you, and strive to ensure meeting your future savings targets as straightforward as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team will assess if we're suited to your needs for you and your business. This initial call lets us get a sense of your goals with no obligation or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll request information, including your employee count, your present financial standing, and your future objectives. This enables us to craft a personalized strategy designed just for you.
- Review Your Plan: When we finalize a plan using 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: After we agree on your plan, we'll set everything up 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 Lubbock, TX financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are committed by law and ethics to act in your best interest.
Other financial advisory services we offer in Lubbock, TX 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 Lubbock, TX
To you, your business is more than "just a business", and your Lubbock, TX financial advisors should provide more than basic financial recommendations. With Correct Capital, we focus on building a relationship with our clients and their businesses to create tailored self-employed retirement plans. All our clients in Lubbock, TX benefit from our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To get started on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
