Self-employed retirement plans Madison, WI. The freedom of running your own company in Madison, WI is one of the best aspects of having a self-directed career. Even so, this freedom sometimes brings with certain challenges, particularly in terms of planning for retirement, as you don't have the benefit of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from looking into other possibilities. In addition to achieving a more secure retirement, partnering with a financial advisor in Madison, WI to create your self-employed retirement plan can provide significant tax advantages that help you to move your business forward.
Few Madison, WI wealth management and retirement planning firms understand the needs of small business owners as well as Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and Correct Capital take pride in helping businesses with their retirement planning needs. We know that your goals for your business and retirement extend well past simple financial figures, and we are dedicated to offer tailored solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Madison, WI, or call Correct Capital at 877-930-401k or contact us online to speak with a entrepreneurial 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. Offering flexibility in contributions to significant tax savings, working with a financial advisor in Madison, WI helps you customize your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) gives you the freedom to modify how much you save:
- Customizable Contributions: Set aside more during successful years and cut back when revenues are down, ensuring your plan works with your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, allowing you to withdraw without tax penalties in the future—a wise move if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA lower your taxable income, allowing you to keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to grow.
- State-Specific Incentives: Depending on where you live, you could qualify for additional deductions as a self-employed individual. These local incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can take advantage of a 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
Building a secure retirement isn’t only about how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across varied asset classes like stocks and bonds serves to reduce risk while still growing your savings.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund ensures you don’t using your retirement funds during challenging periods and incurring penalties.
Plan for the Future of Your Madison, WI Business
A thoughtful retirement strategy also helps you think through what’s next with your Madison, WI business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and don’t transfer with the business. These plans ensure the reliable income you’ll need during retirement. It’s important to note that while the sale of a business usually creates a capital gain, deposits into these plans are subject to yearly maximums (e.g., a maximum of $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, factoring in catch-up contributions, depending on plan details).
- Minimizing Taxes: Making the most of retirement savings helps lower the taxes you are required to pay when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your nest egg ensure financial security during the change. You can also seek advice from a financial advisor who specializes in succession planning and retirement accounts to reduce taxes on the sale.
With the proper savings strategy, you can take control of 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?
There’s no denying that time is one of the most valuable resources in retirement planning. Starting early not only lets you accumulate a bigger financial cushion but also minimizes the stress of catching up later in life. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund could lead to a significant impact on the total you’ll have when you stop working. The main reason is compound interest—the powerful process where your investments grow, and those returns, then, accumulate even more returns. The longer your money has to grow, the greater the benefit of this growth.
Example: Two individuals, Alex and Taylor are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but saves $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor invests $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments invested steadily often create significant growth. Take a look at this scenario showing the power of consistent growth:
- Starting at age 25: If you invest $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month yields only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the less you need to save each year to meet your retirement goals.
*These calculations are based on estimates generated with NerdWallet’s Compound Interest Calculator, based on 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. Outcomes may change depending on elements like market conditions, fees, and your unique situation. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
For self-employed individuals in Madison, WI, it can be tempting to focus more on reinvesting in your business rather than saving for retirement. Even so, beginning a plan now enables you to:
- Benefit from tax-free future growth or tax-free withdrawals down the road.
- Enjoy adjustable savings that align with your earnings.
- Build a financial cushion that ensures stability, no matter how your business evolves.
The sooner you start, the less you’ll be required to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and creating for yourself the ability to concentrate on your dreams—both for your future retirement and your Madison, WI business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for self-employed individuals in Madison, WI, each offering its own benefits and trade-offs. A financial advisor can help you evaluate the advantages and disadvantages of each plan and choose the one most suitable for your circumstances. Generally speaking, your self-employed retirement plan options in Madison, WI are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that offer distinct tax benefits. In a conventional IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but retirement distributions are taxed as income. In contrast, Roth IRA contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are exempt from taxes. In both accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, traditional and Roth IRAs are accessible for individuals with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that enables self-employed individuals to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions above the 25% you (the employer) allocate. 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. SEP IRAs is a good option for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs work like traditional IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Employers of any type, including 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
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan meant for businesses without employees or where the only employee is a spouse. These plans operate much like traditional employer-managed 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This provides more savings versus SEPs or IRAs; however, the increased savings potential may be offset by more limited investment options. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your self-employed earnings, subject to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your net self-employment income, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 if you're over age 50 (in 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 delivers a pre-established payout to entrepreneurs upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand what they'll receive in retirement. This option is best suited for high-earning professionals who want to save a substantial amount for retirement and are willing to make larger deposits. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income upon retirement.
Eligibility: Entrepreneurs operating a solo business or with a small staff of under five may establish an individual defined benefit plan, but it's typically recommended for individuals aged 50+ who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% but are open to increasing contributions
- Companies showing consistent profit patterns
- Business leaders over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions requires calculation from an actuary determined by your financial situation, age, and savings targets. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Madison, WI for Your Self-Employed Retirement Plan
Working with a financial advisor in Madison, WI experienced with retirement plans for the self-employed is an invaluable resource for entrepreneurs. They bring the skills needed to navigate the complexities of retirement planning and design a personalized approach that matches your objectives. A financial advisor in Madison, WI will evaluate your financial situation, determine how much risk you’re comfortable with, and guide you in selecting the best options about saving and investing for retirement. Included in what we do for you features:
- Guide you in choosing a plan that suits your unique requirements
- Tailor the plan to your needs even further
- Create a written plan that complies with IRS regulations
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Provide ongoing education and advice throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Madison, WI: Correct Capital's Process
Madison, WI business owners who aren’t equipped with the time or understanding to oversee their retirement savings strategy themselves often feel overwhelmed when faced with their available plans. Through our team at Correct Capital, our Madison, WI financial advisors handle the lion's share of your savings plan setup for you, to help make meeting your retirement goals as hassle-free as possible for you. We are here to assist you in setting up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: In just 20 minutes, a member of our advisor team can determine if we're a good fit for you and your business. This initial call lets us get a sense of your goals with no obligation or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including whether you have employees, your present financial standing, and your long-term savings targets. This enables us to craft a custom plan designed just for you.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll schedule a meeting and discuss your plan in detail to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll put everything in place 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, meaning they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Madison, WI include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Madison, WI
Your business isn't "just a business" to you, and your Madison, WI financial advisors must deliver more than basic financial recommendations. With Correct Capital, we make it a priority to understand our clients and their businesses to deliver customized self-employed retirement plans. All our clients in Madison, WI benefit from our I.O.U. promise: everything we recommend 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.
