Self-employed retirement plans in Madison County, IL. The freedom of running your own business in Madison County, IL is one of the great things about being self-employed. But increased leeway can be accompanied by a lack of security, particularly in terms of building a retirement plan, as you don't have access to any employer plans. Only 13% of self-employed individuals have retirement plans they save with, but many would be wise to look into their options. In addition to a more comfortable retirement, partnering with a financial advisor to get started and maintain your self-employed retirement plan in Madison County, IL offers favorable tax incentives that can help drive you and your business towards success.
Only a handful of financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can read more about our story here). We know that your business and retirement goals extend far beyond just profit, and we are committed to offering tailored plans that reflect your goals. Continue reading to learn more about your self-employed retirement plan options in Madison County, IL, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a small business financial advisor now.
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Types of Self-Employed Retirement Plans
There are many retirement savings options available for self-employed individuals, each with its own set of benefits and considerations. A Madison County, IL financial advisor can help you grasp the advantages and disadvantages of each option and choose that works best for you. Generally, your self-employed retirement plan options in Madison County, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that allows you to set aside money for the future, with special tax considerations. In a traditional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but distributions in retirement are subject to income tax. On the other hand, Roth IRA contributions are made with after-tax income, but you pay no taxes on withdrawals or investment gains. In both accounts, withdrawals are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through an employer, traditional and Roth IRAs can be set up by anyone with an earned income.
Contribution Limits: For 2023, annual contribution limits for IRAs are $6,500, or $7,500 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that allows self-employed individuals to contribute a share of of their net earnings from self-employment. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. If you have employees, you would have to contribute the same amount for them as you do for yourself. You may choose to contribute either a predetermined fixed dollar amount or a proportion of annual income to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that go through fluctuating income periods. SEP IRAs don't have the high upfront costs or administrative expenses other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with money you haven't paid taxes on and distributions are taxed as income.
Eligibility: Self-employed individuals and any employer, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the maximum amount you can contribute in a given year is based on a unique calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan for businesses with no employees or who only employ a spouse. Solo 401(k)s function similarly to employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers more savings than some other retirement savings plans, however the additional opportunities for saving are often counteracted by having less investment options available. In a solo 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only self-employed individuals and their spouses have access to solo 401(k)s.
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you can make two types of contributions:
- Elective deferrals (as an employee) of 100% of your earned income from self-employment, up to the annual contribution limit. In 2023, those limits are $22,500, or $30,000 if you are 50 or older.
- Employer profit-sharing contributions (as an employer) of up to 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.
The total contribution cannot exceed $66,000, or $73,500 if you're over age 50 (in 2023).
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement plan that provides a a predetermined monthly figure to self-employed individuals once they've retired. In contrast to other types of retirement plans, a defined benefit plan doesn't go up and down because of investment returns, but allows self-employed people to know exactly how much they'll get in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a significant sum for retirement and are willing to add substantial contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs a business where they're the only owner or has less than five employees can establish an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn at least $250,000 a year. Those interested in defined benefit plans tend to be:
- Partners or owners who desire to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to do more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit is decided by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted each year.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in Madison County, IL
A financial advisor in Madison County, IL specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the expertise to help you navigate the complexities of retirement planning and design a customized plan that acts as a roadmap through your financial future. A financial planner will look at where your finances currently are, adjust for your risk tolerance, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Adopt a written plan in accordance with IRS rules
- Arrange a trust plan for assets
- Implement a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and support into and through retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Madison County, IL: Correct Capital's Process
Madison County, IL business owners without the time, inclination, or knowledge to handle their self-employed retirement plan themselves can become burdened with the different options available to them. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning for you, and endeavor to make achieving your retirement goals as easy as possible for you. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — It only takes a brief 20-minute call for a member of our advisor team to understand if we're a good fit for you and your business. This short introduction lets us understand what you're looking for with no obligation on your part.
- Gather Information — If we both decide to move forward, we'll ask for more info, including how many employees you have (if any), your current finances, and your retirement goals. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and go over the details of your plan to ensure it's what you were looking for.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so you can start saving. Throughout our relationship, we'll meet with you and monitor your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's in your best interest. We pride ourselves in providing clear communication and excellent service to assist you reach your self-employed retirement goals.
Other services we offer in Madison County, IL include:
Call Correct Capital for Your Madison County, IL Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Madison County, IL financial advisors need to provide you with more than simply wise financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver tailored self-employed retirement plans. We give all our Madison County, IL clients 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 in Madison County, IL, speak to a financial advisor today at 877-930-4015 or contact us through our website.
