Self-employed retirement plans Madison, WI. The flexibility of owning your own business in Madison, WI is one of the best aspects of being self-employed. That said, this independence can come with potential drawbacks, notably regarding building your retirement fund, because you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off exploring their options. In addition to enjoying a more secure retirement, working with a financial advisor in Madison, WI to create your self-employed retirement plan delivers significant tax advantages that enable your business to grow and succeed.
Few Madison, WI financial advisory and retirement planning firms understand the needs of self-employed individuals quite like Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and our firm have a rich history of supporting entrepreneurs with their retirement planning needs. We recognize that your business and retirement aspirations go far beyond simple financial figures, and we strive to create tailored solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Madison, WI, or reach out to Correct Capital at 877-930-401k or contact us online to speak with a self-employed financial advisor in Madison, WI today.
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Why Madison, WI Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide tangible benefits today. Offering flexibility in contributions to considerable tax savings, consulting a financial advisor in Madison, WI helps you design your retirement plan to align with your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the flexibility to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and scale back when revenues are down, ensuring your plan works with your cash flow.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, so you can withdraw your savings tax-free down the road—an advantageous choice if you anticipate your tax rate is likely to rise in the future.
Save Money on Taxes
Self-employed retirement plans offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you may be eligible for state-specific credits as a self-employed individual. These local incentives can make these plans even more beneficial.
- 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 they contribute a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across a mix of stocks, bonds, and alternatives is a smart way to minimize exposure to risk while still growing your retirement fund.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net helps you avoid using your retirement funds during financial hardships and risking extra costs.
Plan for the Future of Your Madison, WI Business
Preparing for retirement enables you to 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 stay in your name and don’t transfer with the business. These savings ensure the financial stability you’ll need during retirement. Keep in mind that while selling your business results in a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you’ll owe when you pass on your business.
- Succession Planning: For those winding down or handing over their business, your retirement savings ensure the funds you need through the transition. You may also partner with a financial advisor who specializes in succession planning and retirement accounts to reduce taxes associated with the transaction.
With the best-fit retirement strategy, you gain control over your financial future, lower your tax bill, and create a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Madison, WI Now?
Time remains one of the most important resources when it comes to saving for retirement. Beginning sooner rather than later not only allows you to build a larger nest egg but also lowers 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 could lead to a significant impact on the amount you’ll have when you stop working. The biggest reason is compound interest—the concept where your investments earn returns, and those returns, in turn, generate even more returns. The longer your money has to grow, the greater the effect of this compounding process.
Example: Alex and Taylor are both entrepreneurs. Their shared goal is to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but contributes $7,500 annually to bridge the gap.
By age 65, using a projected 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently often create impressive growth. Consider this example showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an average annual return of 7%, you’ll grow to approximately $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 difference of over $260,000, simply due to a 10-year delay.
Starting sooner, the less you need to save each year to reach your retirement goals.
*The figures provided in this example are 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. This information is intended as illustrative examples 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 personalized advice.
Take Control of Your Financial Future
If you’re self-employed in Madison, WI, it is often the case that you prioritize reinvesting in your business over saving for retirement. Even so, beginning a plan now enables you to:
- Leverage growth that is tax-deferred or penalty-free withdrawals later on.
- Benefit from flexible contributions that adapt to your cash flow.
- Build a financial cushion that provides security, no matter how your business evolves.
Getting started now, the less you’ll need to worry about playing catch-up later in life. Building your retirement savings today means gaining control over your financial future and giving yourself the opportunity to focus on your objectives—both for your future retirement and your Madison, WI business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for entrepreneurs in Madison, WI, each with its own advantages and considerations. A financial advisor can help you evaluate the advantages and disadvantages of each option and choose the one best suited for your needs. In most cases, your self-employed retirement plan options in Madison, WI include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that provide distinct tax benefits. In a conventional IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but retirement distributions are taxable. In contrast, Roth IRA contributions are made with after-tax income, but qualified withdrawals in retirement, including earnings, are tax-free. In both cases, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are available to anyone with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $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 is a retirement plan that allows those who are self-employed to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) allocate. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a fixed dollar figure or a percentage of wages to employee accounts. SEP IRAs may be ideal for businesses that experience cycles of high revenue and low revenue. In contrast to some alternatives, SEP IRAs are free of expensive setup or ongoing fees.
SEPs operate like traditional IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Both employers and self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also called an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan intended for businesses with no employees or if the only employee is your spouse. This type of plan are similar to standard 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This allows for more savings versus SEPs or IRAs; however, the additional opportunities may be offset by more restricted investment choices. Using a solo 401(k), you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you are allowed to make two types of contributions:
- Deferrals as an employee of up to 100% of your earned income from self-employment, up to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you're over 50, or $34,750 for individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) must not surpass 25% of your adjusted self-employment income, which is defined as net profit minus half of your self-employment tax and the employee contributions you made.
Your combined contributions must not surpass $70,000, or $77,500 for those aged 50 and older (as of 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that guarantees a pre-established payout to entrepreneurs upon retirement. Unlike defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know what they'll get in retirement. This plan is recommended for wealthier professionals who aim to accumulate a large amount for retirement and are willing to make sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income in retirement.
Eligibility: Any self-employed individual managing a one-person company or with a small staff of under five can open an individual defined benefit plan, but it's typically suggested for people above age 50 who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans include:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% and are willing to do more
- Companies that have demonstrated consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution is calculated by an actuary based on your earnings, age, and retirement objectives. Contribution limits are adjusted each year.
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 can be an invaluable resource for those working for themselves. They offer the knowledge to assist understand the intricacies of saving for retirement and craft a personalized approach that reflects your aspirations. An expert in your area will evaluate your financial situation, determine how much risk you’re comfortable with, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you involves:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Tailor the plan to your needs even further
- Formalize a plan in writing in accordance with IRS guidelines
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Track and fine-tune your plan to keep it aligned with your goals
- Deliver continuous support and financial insights as you continue on the road to retirement
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Madison, WI: Correct Capital's Process
Entrepreneurs in Madison, WI who don’t have the time or expertise to oversee their retirement savings strategy on their own can become overwhelmed when faced with their choices. With Correct Capital, our Madison, WI financial advisors take on the bulk of your retirement strategy for you, working to make meeting your financial objectives 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: It only takes 20 minutes, a member of our advisor team will assess if our services align for you and your business. This short conversation helps us learn about your needs with no pressure or major time investment on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including whether you have employees, your existing financial picture, and your future objectives. This helps us create a personalized strategy designed just for you.
- Review Your Plan: Once we've developed a plan using the information you provide, we'll meet with you and review 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 implement the necessary steps so you can begin contributing. As time goes on, we'll check in and monitor your plan to ensure it stays suited to your needs.
Our Madison, WI financial advisors and retirement plan consultants are fiduciary advisors, meaning they are committed by law and ethics to act in your best interest.
Other financial advisory services we offer in Madison, WI 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 Madison, WI
To you, your business is more than "just a business", and your Madison, WI financial advisors should provide more than just good financial guidance. Correct Capital takes pride in, we focus on building a relationship with our clients and their businesses to provide personalized self-employed retirement plans. All our clients in Madison, WI benefit from 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.
