Self-employed retirement plans Madison, WI. The flexibility of running your own company in Madison, WI is one of the greatest advantages of being self-employed. However, this freedom often comes with a lack of security, particularly regarding retirement savings, because you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, yet countless should consider exploring their options. In addition to enjoying a more comfortable retirement, seeking advice from a financial advisor in Madison, WI to set up your self-employed retirement plan delivers significant tax advantages that help both you and your business to thrive.
Few Madison, WI financial advisory and retirement planning firms are as attuned to the requirements of small business owners quite like Correct Capital. Our founder's father was a small business owner himself (read more of our story here), and our firm take pride in helping businesses with their retirement planning needs. We understand that your business and retirement aspirations extend well past simple financial figures, and we strive to provide customized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Madison, WI, or call Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Madison, WI today.
Why Madison, WI Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver immediate benefits today. With customizable contribution options to substantial tax savings, consulting a financial advisor in Madison, WI enables you to create your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) provides the option to tailor how much you save:
- Customizable Contributions: Contribute more during successful years and cut back when your earnings dip, so that your plan works with your cash flow.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw your savings tax-free down the road—an advantageous choice if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, helping you keep more of your income.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, which gives your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you may be eligible for additional credits as a business owner. These regional incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants 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
Creating a stable future requires more than how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across a mix of asset classes like stocks and bonds can help mitigate financial risk while continuing to build your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business ensures you don’t dipping into savings during tough times and risking extra costs.
Plan for the Future of Your Madison, WI Business
A thoughtful retirement strategy can assist you plan ahead for what’s next with your Madison, WI business:
- Selling Your Business: If you’re planning to sell, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and don’t transfer with the business. These accounts ensure the steady income you’ll need in the future. Keep in mind that while selling a business often leads to a capital gain, retirement plan contributions are capped at annual 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, based on plan compensation).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you are required to pay when you transfer your business.
- Succession Planning: If you’re passing the business on, your retirement savings provide the funds you need through the transition. You may also partner with a financial advisor experienced in both succession and retirement strategies to minimize tax burdens associated with the transaction.
With the proper savings strategy, you gain control over 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 Madison, WI Now?
Time is one of the most important factors for building your retirement fund. Beginning sooner rather than later not only helps you grow a bigger financial cushion but also reduces the financial burden of catching up later in life. Here’s why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement may cause a significant impact on the amount you’ll have when you stop working. The primary reason is compound interest—the powerful process where your investments grow, and those returns, subsequently, generate even more returns. The more time your money has to grow, the larger the benefit of this compounding process.
Example: Taylor and Alex are both self-employed individuals. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but saves $7,500 annually to catch up.
By age 65, with an assumption of 7% annual return:
- Alex puts in $180,000 and accumulates $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings invested steadily may result in impressive growth. Here’s a simple scenario showing the impact of compounding:
- Starting at age 25: By investing $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: Saving 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 lower your annual savings needs each year to achieve your retirement goals.
*The numbers shown in this scenario represent estimates generated with 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 meant to provide general guidance and do not guarantee future performance. Your individual results may differ based on variables including market conditions, fees, and your unique situation. Always consult a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Madison, WI, it can be tempting to prioritize reinvesting in your business rather than saving for retirement. That said, initiating a plan now gives you the chance to:
- Leverage growth that is tax-deferred or tax-free withdrawals in the future.
- Take advantage of adjustable savings that change with your income.
- Establish a long-term safety measure that offers peace of mind, no matter how your business develops.
Getting started now, the less you’ll have to worry about playing catch-up later in life. Building your retirement savings today means gaining control over your financial future and allowing yourself the opportunity to turn your attention to your goals—both for your retirement years and your Madison, WI business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for those working for themselves in Madison, WI, each offering its own benefits and trade-offs. A financial advisor can help you understand the advantages and disadvantages of each choice and choose the one most suitable for your needs. In most cases, your self-employed retirement plan options in Madison, WI consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that include distinct tax benefits. In a conventional IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but money taken out during retirement are taxed as income. In contrast, Roth IRA contributions using income already taxed, but eligible distributions during retirement, including earnings, are tax-free. In both cases, withdrawals are penalty-free as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, IRAs, including traditional and Roth options are accessible for individuals with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that permits 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 above the 25% you (the employer) already contributed. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA may be ideal for companies with fluctuating revenue streams. Compared to other retirement options, SEP IRAs are free of expensive setup or ongoing fees.
SEPs operate 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
For self-employed individuals, 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 retirement savings plan designed for businesses without employees or if the only employee is your spouse. This type of plan operate much like standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This offers more savings compared to 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 share the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you have the ability to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employed earnings, capped at the annual contribution limit. In 2025, those limits are $23,500, or $31,000 if you're over 50, or $34,750 for individuals aged 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 25% of your net self-employment income, which is your net profit minus half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that provides a fixed, predetermined benefit to entrepreneurs upon retirement. In contrast to the plans discussed earlier, investment returns don’t affect the payout, but allows self-employed individuals to know exactly how much they'll have in retirement. This strategy is ideal for higher-income self-employed individuals who want to save a large amount for retirement and can commit to making substantial contributions. Contributions are tax deferred, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs operating a solo business or employing fewer than five people can open an individual defined benefit plan, but it's most commonly advised for people above age 50 who make $250,000 or more annually. Typically, good candidates for defined benefit plans are:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Organizations that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The cap on contributions is calculated by an actuary determined by your earnings, age, and retirement objectives. Limits on contributions change annually.
The Importance of a Financial Advisor in Madison, WI for Your Self-Employed Retirement Plan
Partnering with an advisor in Madison, WI focused on self-employed retirement strategies is an important asset for those working for themselves. They have the expertise to help understand the intricacies of saving for retirement and design a tailored strategy that aligns with your goals. Your advisor in Madison, WI will review your finances, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. A key part of 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 in accordance with IRS guidelines
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Track and fine-tune your plan when necessary
- Deliver continuous support and financial insights throughout your retirement planning process
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in Madison, WI: Correct Capital's Process
Self-employed individuals in Madison, WI who lack the time, interest, or knowledge to oversee their own retirement planning themselves may end up overwhelmed by their options. With Correct Capital, our Madison, WI financial advisors take on the majority of your savings plan setup for you, and strive to ensure meeting your financial objectives as easy as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team will assess if we're suited to your needs for you and your business. This initial call helps us learn about your needs with no obligation or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll request information, including how many employees you have (if any), your present financial standing, and your long-term savings targets. This allows us to put together a personalized strategy designed just for you.
- Review Your Plan: Once we've developed a plan based on the information you provide, we'll schedule a meeting and discuss your plan thoroughly to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll set everything up so you can start saving. As time goes on, we'll have regular meetings and monitor your plan to keep it tailored to your evolving circumstances.
Our Madison, WI financial advisors and retirement plan consultants serve as fiduciary advisors, which means they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Madison, WI include:
- Investment Management
- 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 Madison, WI
You don't see your business as "just a business", and your Madison, WI financial advisors must deliver more than basic financial recommendations. At Correct Capital, we take the time to get to know our clients and their businesses to deliver tailored self-employed retirement plans. To every client in Madison, WI, we provide our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To get started on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
