Self-employed retirement plans in Madison County, IL. The freedom of having your own business in Madison County, IL is a wonderful advantage to working for yourself. But that freedom can be accompanied by uncertainty, especially in when it comes to saving for retirement, employer-sponsored plans aren't an option. Only 13% of self-employed people have a workplace retirement plan, but many would be better off exploring their options. In addition to a more comfortable retirement, working with a financial advisor to get started and maintain your self-employed retirement plan in Madison County, IL offers tax benefits that can help drive you and your business forward.
Few financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner more than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can discover more about our story here). We have a deep understanding that your business and retirement aspirations transcend figures and numbers, and we are devoted to offering tailored plans that reflect your goals. Continue reading to read more about your self-employed retirement plan options in Madison County, IL, or call Correct Capital at 877-930-4015 or contact us online to speak to a member of our advisory team at your convenience.
Types of Self-Employed Retirement Plans
There are a few different 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 comprehend the advantages and disadvantages of each option and opt for the most suitable one for your specific needs. Generally, your self-employed retirement plan options in Madison County, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that offer specific tax advantages. If you deposit to a traditional IRA, contributions are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are liable to income tax. In contrast, Roth IRA contributions are made with after-tax income, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals can be made without extra fees if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are available to 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 annual income from self-employment. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot exceed 25%. If you have employees, you would have to contribute the same amount for them as you do for yourself. You can either contribute either a fixed dollar sum or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan for businesses that go through cycles of high revenue and low revenue. SEP IRAs don't have expensive initial setup or administrative charges other retirement plans do.
SEPs work like traditional IRAs, where deposits are made with money you've yet to pay taxes on and withdrawals are taxed at your income at the time of withdrawal.
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 decided by a special 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 sole proprietors or those who only employ a spouse. Solo 401(k)s function about the same as employer-sponsored 401(k) plans, and you can add funds as both an employer or employee with pre-tax money. This offers greater potential for savings than some other retirement savings plans, however the possibility of greater retirement savings is often counteracted by having less investment options available. In a one-participant 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only sole proprietors and their spouses can establish and contribute to a solo 401(k).
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) which cannot exceed a maximum of 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 an assured monthly figure to self-employed individuals after they've left the workforce. As opposed to 401(k)s or IRAs, a defined benefit plan doesn't fluctuate because of investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a significant sum for retirement and are willing to make substantial contributions. Contributions are tax deferred and withdrawals are taxed as income in retirement.
Eligibility: Any self-employed individual who runs a business with no employees besides the owner or has less than five employees can open an individual defined benefit plan, but it's typically only recommended for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who want to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who have demonstrated consistent 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 must be calculated by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted each year.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Madison County, IL
A financial advisor in Madison County, IL specialized in self-employed retirement plans can be indispensable for self-employed individuals. They have the expertise to help you navigate the complexities of retirement planning and design a personalized approach that aligns with your goals. A financial planner will assess where your finances currently are, help you figure out your risk tolerance, and help you make sound decisions about your financial future. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan that follows all IRS rules
- Arrange a trust plan for assets
- Create a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and support as you continue on the road to retirement
- Increase 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 who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become overwhelmed with the different options available to them. At Correct Capital, our financial advisors handle the lion's share of your retirement planning on your behalf, and strive to make meeting your retirement goals as easy as possible for you. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes a brief 20-minute call for a member of our advisor team to understand if we're the best firm to help you reach your goals. This short introduction allows us to get a feel for what you're looking for with no obligation on your part.
- Gather Information — If we seem like a good fit, we'll ask for information, including how many employees you have (if any), your current financial situation, and what kind of retirement you want to have. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and discuss your plan in detail to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so your savings can start growing immediately. As long as we work together, we'll meet with you and adjust your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's in your best interest. We are proud to provide clear communication and high-quality service to assist you achieve your self-employed retirement goals.
Other services we offer in Madison County, IL include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
Call Correct Capital for Your Madison County, IL Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Madison County, IL financial advisors need to offer more than merely sage financial advice. Correct Capital takes pride in getting to know our clients and what makes them and their business tick to deliver personalized 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, call Correct Capital today at 877-930-4015 or contact us online.
