Self-employed retirement plans in Manchester, MO. The freedom of having your own business in Manchester, MO is a fantastic aspect of being self-employed. But that freedom can be accompanied by a lack of security, especially in in regards to saving for retirement, you don't have an employer who will set up a plan for you. Barely more than 10% of self-employed individuals have retirement plans they save with, but many would be better off exploring what plans are available. In addition to a more comfortable retirement, working with a financial advisor to get started and maintain your self-employed retirement plan in Manchester, MO offers favorable tax incentives that can help you improve your bottom line.
Few wealth management and retirement planning firms will understand the needs of the self-employed and small business owners more than Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can learn more about our story on our website). We know that your business and retirement aspirations transcend figures and numbers, and we are devoted to providing customized plans that fit your goals. Continue reading to read more about your self-employed retirement plan options in Manchester, MO, or call Correct Capital at 314-930-401(k) or fill out our online form to speak to a member of our advisory team at your convenience.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for self-employed individuals, each with its own set of benefits and considerations. A Manchester, MO financial advisor can help you understand the benefits and drawbacks of each option and opt for the most suitable one for your situation. Generally, your self-employed retirement plan options in Manchester, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that allows you to set aside money for the future, with special tax considerations. In a traditional IRA, deposits are deducted from your taxable income, and investment earnings grow tax-deferred, but distributions in retirement are taxed as if it were income. On the other hand, Roth IRA deposits are made with money you've already paid taxes on, but qualified distributions in retirement, including earnings, are tax-free. In both a traditional an a Roth IRA, distributions 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 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 percentage of of the money they make from their self-employment. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 25%. If you have employees, you would have to contribute the same amount for them as you do for yourself. You can either contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be an excellent 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 payments are made with money you haven't paid taxes on and withdrawals are taxed as income.
Eligibility: Any employer, including the self-employed, can set up a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
For self-employed people, the annual contribution limit is decided by a unique calculation.
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 whose only employee is a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can make contributions as an employee and on your own behalf as the employer. This offers increased savings opportunities than some other retirement savings plans, however the possibility of greater retirement savings is often counterbalanced by having less investment options available. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax advantages as their IRA contribution counterparts.
Eligibility: Only self-employed individuals and their spouses can set up 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 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.
On an annual basis, contributions 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 benefit to self-employed individuals after they've left the workforce. As opposed to 401(k)s or IRAs, a defined benefit plan doesn't go up and down because of investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and want to make significant 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 open an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who want to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want 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 didn't save as much
Contribution Limits: The contribution limit must be determined by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Manchester, MO
A financial advisor in Manchester, MO specialized in self-employed retirement plans can be a crucial partner for self-employed individuals. They have the knowledge to help you understand the intricacies of retirement planning and develop a tailored strategy that acts as a roadmap through your financial future. A financial planner will evaluate where your finances currently are, help you figure out your risk tolerance, and guide you in making informed decisions for yourself, both as employer and future retiree. 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 guidelines
- 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 as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Manchester, MO: Correct Capital's Process
Manchester, MO 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 for you, and attempt to make meeting the golden years of your dreams as simple as we possibly can. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need a short 20-minute call for one of our advisors to know if we're suitable for you and your business. This short introduction allows us to get a feel for what you're looking for with no major time investment for you.
- Gather Information — If we both decide to move forward, we'll ask for information, including how many employees you have (if any), your current financial situation, 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 specifics of your plan to ensure it's what you were looking for.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so you can start saving. Throughout your time partnering with us, we'll keep you up-to-date with how things are going and adjust your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and morally bound to do what's in your best interest. We pride ourselves in providing clear communication and top-notch service to assist you reach your self-employed retirement goals.
Other services we offer in Manchester, MO 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
- Retirement Calculator
Call Correct Capital for Your Manchester, MO Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your Manchester, MO financial advisors need to offer more than simply sound 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 offer all our Manchester, MO clients the same 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 Manchester, MO, speak to a financial advisor today at 314-930-401(k) or fill out our online form.