Self-employed retirement plans McKinney, TX. The freedom of being your own boss in McKinney, TX is one of the best aspects of being self-employed. That said, this flexibility sometimes brings with a lack of security, particularly when it comes to retirement savings, because you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off exploring their options. In addition to enjoying a more secure retirement, partnering with a financial advisor in McKinney, TX to create your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few McKinney, TX financial advisory and retirement planning firms understand the needs of self-employed individuals better than Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and our firm take pride in assisting business owners in their retirement planning needs. We know that your professional and personal aspirations extend well past simple financial figures, and we strive to create personalized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in McKinney, TX, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in McKinney, TX today.
Why McKinney, TX Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also offer real benefits today. From flexible contributions to considerable tax savings, working with a financial advisor in McKinney, TX allows you to create your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to adjust how much you save:
- Customizable Contributions: Save extra during successful years and reduce savings when revenues are down, so that your plan fits your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you pay taxes on contributions now, allowing you to 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
Plans designed for the self-employed offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, allowing you to keep more of your income.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to compound.
- State-Specific Incentives: Based on your location, you might access extra tax breaks as a self-employed individual. These state-level incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can take advantage of a 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
Planning for a safe retirement isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and other assets can help reduce risk while helping to grow your savings.
- Emergency Back-Up: Supplementing your retirement savings with a business emergency fund ensures you don’t dipping into savings during challenging periods and facing tax penalties.
Plan for the Future of Your McKinney, TX Business
A thoughtful retirement strategy enables you to prepare for what’s next with your McKinney, TX business:
- Selling Your Business: If you’re planning to sell, plans like SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These accounts offer the steady income you’ll need during retirement. Keep in mind that while selling a business often leads to a capital gain, contributions to retirement accounts are capped at annual limits (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, factoring in catch-up contributions, depending on plan details).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you are required to pay when you pass on your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts ensure a stable foundation as you make this shift. You may also seek advice from a financial advisor experienced in both succession and retirement strategies to reduce taxes during the sale.
With the right retirement plan, you gain control over your financial future, reduce your tax burden, and build a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in McKinney, TX Now?
There’s no denying that time is one of the most important factors in retirement planning. Getting a head start not only lets you accumulate a more substantial retirement fund but also lowers the stress of catching up later in life. Here’s why it makes sense to begin today:
The Cost of Waiting
Waiting to start your retirement fund can have a significant impact on the amount you’ll have when you retire. The primary reason is compound interest—the concept where your investments generate earnings, and those returns, subsequently, earn even more returns. The greater time span your money has to grow, the greater the effect of this compounding process.
Example: Two individuals, Alex and Taylor are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but saves $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently may result in significant growth. Consider this example showing the impact of compound interest:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an average annual 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 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.
*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. These examples are meant to provide general guidance and are not a promise of future results. Your individual results may differ depending on variables including market conditions, fees, and your unique situation. Always consult a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in McKinney, TX, it might seem easier to focus more on reinvesting in your business over saving for retirement. That said, starting a plan now allows you to:
- Leverage tax-deferred growth or tax-free withdrawals down the road.
- Take advantage of adjustable savings that align with your cash flow.
- Establish a financial cushion that provides security, no matter how your business changes.
The sooner you start, the less you’ll have to worry about making up for lost time later in life. Building your retirement savings today means taking control of your financial future and giving yourself the ability to concentrate on your dreams—both for your retirement years and your McKinney, TX business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for self-employed individuals in McKinney, TX, each with its own pros and cons. A financial advisor can help you understand the advantages and disadvantages of each plan and identify the one ideal for your unique situation. Generally speaking, your self-employed retirement plan options in McKinney, TX consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that provide key tax perks. In a conventional IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but retirement distributions are taxable. In contrast, with Roth IRAs, you contribute using income already taxed, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both accounts, withdrawals come without penalties if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, both traditional and Roth IRAs are available to anyone with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that enables self-employed individuals to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) are limited to contributions from the employer role beyond the 25% you (the employer) have designated. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You may choose to contribute a fixed dollar figure or a percentage of wages to employee accounts. A SEP IRA may be ideal for businesses that experience periods of inconsistent earnings. Compared to other retirement options, SEP IRAs are free of expensive setup or ongoing fees.
SEPs work like traditional IRAs, where the contributions are tax-deferred 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
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 retirement savings plan meant for businesses without employees or where the only employee is a spouse. These plans are similar to employer-sponsored 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This provides more savings than SEPs or IRAs; however, the additional opportunities may be offset by more restricted investment choices. 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: Solo 401(k)s are available solely to business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: If you are self-employed 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 self-employed earnings, subject to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) are limited to 25% of your net self-employment income, which is calculated as net profits less half of your self-employment tax and the elective deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 for individuals aged 50+ (in 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that delivers a fixed, predetermined benefit to entrepreneurs upon retirement. In contrast to the plans discussed earlier, this plan is not influenced by market performance, but lets individuals clearly understand exactly how much they'll get in retirement. This strategy is best suited for high-earning entrepreneurs who aim to accumulate a large amount for retirement and are willing to make sizeable contributions. Contributions are tax deferred, and withdrawals are taxed as income in retirement.
Eligibility: Any self-employed individual running an owner-only business or employing fewer than five people can open an individual defined benefit plan, but it's typically advised for those over 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans are:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Companies with proven consistent profit patterns
- Business leaders over age 40 who wish to accelerate savings or boost savings within a short timeframe
Contribution Limits: The contribution limit is calculated by an actuary determined by your financial situation, age, and savings targets. Contribution limits are updated yearly.
The Importance of a Financial Advisor in McKinney, TX for Your Self-Employed Retirement Plan
Partnering with an advisor in McKinney, TX focused on self-employed retirement strategies serves as an invaluable resource for those working for themselves. They have the expertise to help understand the intricacies of saving for retirement and craft a tailored strategy that aligns with your goals. Your advisor in McKinney, TX will evaluate your financial situation, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. Included in what we do for you includes:
- Assist in selecting a plan that suits your unique requirements
- Customize the plan to your needs even further
- Formalize a plan in writing as required by IRS rules
- Set up an asset trust plan
- Help you understand the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Provide ongoing education and advice as you continue on the road to retirement
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in McKinney, TX: Correct Capital's Process
Entrepreneurs in McKinney, TX who don’t have the time or expertise to handle their own retirement planning themselves can become overwhelmed when faced with their available plans. At Correct Capital, our McKinney, TX financial advisors handle the majority of your savings plan setup for you, to help make meeting your future savings targets as hassle-free as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team will assess if we're suited to your needs for you and your business. This short conversation lets us learn about your needs with no obligation or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll gather information, including how many employees you have (if any), your existing financial picture, and your long-term savings targets. This allows us to put together a tailored approach designed just for you.
- Review Your Plan: When we finalize a plan from the information you provide, we'll schedule a meeting and go over your plan step by step to make sure it's clear and understand how it best correlates to your needs.
- Implementation and Monitoring: Once we've agreed on your plan, we'll implement the necessary steps so you can initiate your savings journey. Over the course of our partnership, we'll check in and review your strategy to make sure it remains aligned with your goals.
Our McKinney, TX financial advisors and retirement plan consultants act as fiduciary advisors, who are obligated to they are committed by law and ethics to act in your best interest.
Other financial advisory services we offer in McKinney, TX 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 McKinney, TX
You don't see your business as "just a business", and your McKinney, TX financial advisors should provide more than simply sound financial advice. At Correct Capital, we take the time to get to know our clients and their businesses to provide personalized self-employed retirement plans. All our clients in McKinney, TX benefit from our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To begin on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
