Self-employed retirement plans McKinney, TX. The independence of being your own boss in McKinney, TX offers many benefits of having a self-directed career. That said, this independence sometimes brings with potential drawbacks, particularly in terms of retirement savings, as you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off looking into other possibilities. In addition to achieving a more comfortable retirement, seeking advice from a financial advisor in McKinney, TX to set up your self-employed retirement plan delivers significant tax advantages that help you to move your business forward.
Few McKinney, TX wealth management and retirement planning firms are as attuned to the requirements of entrepreneurs better than Correct Capital. Our founder's father was a small business owner himself (learn more about our story here), and we are deeply experienced in assisting business owners in their retirement planning needs. We understand that your professional and personal aspirations aren’t limited to simple financial figures, and we strive to offer customized 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 speak with a small business financial advisor in McKinney, TX today.
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Why McKinney, TX Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also offer immediate benefits today. Offering flexibility in contributions to substantial tax savings, partnering with a financial advisor in McKinney, TX enables you to create your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the freedom to modify how much you save:
- Customizable Contributions: Set aside more during successful years and scale back when income is lower, ensuring your plan works with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw your savings tax-free down the road—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 shrink your tax liability, so you can keep more of your income.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, giving your money more time to accumulate.
- State-Specific Incentives: In some states, you may be eligible for additional credits as a sole proprietor. These state-level incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Distributing your investments across different asset classes like stocks and bonds can help mitigate financial risk while still growing your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net ensures you don’t dipping into savings during tough times and risking extra costs.
Plan for the Future of Your McKinney, TX Business
Preparing for retirement enables you to think through what’s next with your McKinney, TX business:
- Selling Your Business: When selling your business, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and are not part of the sale. These plans ensure the reliable income you’ll need in the future. Keep in mind that while the sale of a business usually creates a capital gain, contributions to retirement accounts are subject to yearly maximums (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Making the most of retirement savings can reduce the taxes you are required to pay when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement accounts provide financial security as you make this shift. You may also partner with a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens on the sale.
With the proper savings strategy, you manage your financial future, lower your tax bill, and establish a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in McKinney, TX Now?
Time is one of the most valuable resources in retirement planning. Getting a head start not only allows you to build a bigger financial cushion but also lowers the financial burden of playing catch-up as you get older. This is why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement could lead to a substantial impact on the total you’ll have when you stop working. The biggest reason is compound interest—the concept where your investments generate earnings, and those returns, in turn, generate even more returns. The more time your money has to grow, the larger the benefit of this compounding process.
Example: Alex and Taylor are both self-employed professionals. Both of them want 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 make up for lost time.
By age 65, assuming 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
Regular, modest investments invested steadily often create impressive growth. Consider this example showing the effect of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an average annual return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month leaves you with only $235,412.97* by age 65—a difference of over $260,000, all because of a 10-year delay.
Saving early, the less you need to save each year to achieve your retirement goals.
*The figures provided in this example are estimates calculated using NerdWallet’s Compound Interest Calculator, based on a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. These examples are intended as illustrative examples and cannot predict actual future outcomes. Actual results may vary due to elements like market conditions, fees, and personal factors. Always consult a financial advisor for custom recommendations.
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 instead of saving for retirement. Even so, initiating a plan now gives you the chance to:
- Leverage tax-deferred growth or withdrawals without taxes in the future.
- Enjoy adjustable savings that adapt to your earnings.
- Build a long-term safety measure that provides security, no matter how your business changes.
The sooner you start, the less you’ll need to worry about making up for lost time later in life. Taking steps toward your retirement goals today means managing your financial future and creating for yourself the opportunity to concentrate on your goals—both for your golden years and your McKinney, TX business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for self-employed individuals in McKinney, TX, each providing its own benefits and trade-offs. A financial advisor will guide you to understand the advantages and disadvantages of each choice and choose the one ideal for your unique situation. Generally speaking, your self-employed retirement plan options in McKinney, TX include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that include distinct tax benefits. In a traditional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but money taken out during retirement are taxable. In contrast, Roth IRA contributions from post-tax earnings, but qualified withdrawals in retirement, including earnings, are not taxed. In both accounts, withdrawals are penalty-free if you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are available to anyone with a source of income.
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: The Simplified Employee Pension IRA offers a way to save for retirement that permits self-employed individuals to save a percentage of their net business profits. Contributions must come from an employer, so, as a independent business owner, you (the employee) would not be able to contribute above 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 set monetary value or a percentage of wages to employee accounts. A SEP IRA may be ideal for companies with cycles of high revenue and low revenue. Compared to other retirement options, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs operate like standard IRAs, where you contribute pre-tax dollars and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can set up 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
For self-employed individuals, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, also called an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for businesses without employees or if the only employee is your spouse. This type of plan operate much like traditional employer-managed 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This offers more savings than SEPs or IRAs; however, the additional opportunities often come with more constrained investment avenues. With this type of 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 may establish and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual 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. 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.
- Contributions as an employer (as an employer) cannot exceed 25% of your net earnings from self-employment, which is calculated as net profits less half of your self-employment tax and the employee contributions you made.
Your combined contributions must not surpass $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: Defined benefit plans is a retirement option that delivers a fixed, predetermined benefit to business owners upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but lets individuals clearly understand exactly how much they'll receive in retirement. This strategy is recommended for high-earning entrepreneurs who aim to accumulate a significant sum for retirement and are prepared to contribute substantial contributions. Contributions are tax deferred, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs running an owner-only business or with a small staff of under five can open an individual defined benefit plan, but it's generally suggested for people above age 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans are:
- Partners or owners who want to invest more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% but are open to increasing contributions
- Companies with proven consistent profit patterns
- Entrepreneurs over age 40 who wish to accelerate savings or accelerate the retirement savings
Contribution Limits: The contribution limit is calculated by an actuary determined by your financial situation, age, and savings targets. Limits on contributions change annually.
The Importance of a Financial Advisor in McKinney, TX for Your Self-Employed Retirement Plan
Partnering with an advisor in McKinney, TX experienced with retirement plans for the self-employed is an important asset for entrepreneurs. They offer the knowledge to assist understand the intricacies of saving for retirement and design a personalized approach that aligns with your goals. An expert in your area will assess where you stand financially, determine how much risk you’re comfortable with, and help you in choosing wisely about saving and investing for retirement. Included in what we do for you involves:
- Assist in selecting a plan that best fits your needs and goals
- Further adapt the plan to your specific situation even further
- Adopt a written plan as required by IRS rules
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance as you continue on the road to retirement
- Boost your retirement earnings by maximizing 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 manage their retirement savings strategy themselves often feel overwhelmed when faced with their choices. At Correct Capital, our McKinney, TX financial advisors manage the bulk of your retirement planning for you, working to make meeting your future savings targets as easy as possible for you. We will guide you in creating your self-employed retirement plan in four simple steps:
- 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 brief introduction allows us to understand what you're looking for with no pressure or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including your employee count, your present financial standing, and your retirement goals. This allows us to put together a tailored approach designed just for you.
- Review Your Plan: Once we've developed a plan using the information you provide, we'll sit down with you and review your plan in detail to ensure you understand it and understand how it best correlates to your needs.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. As time goes on, we'll meet with you and track your progress to ensure it stays suited to your needs.
Our McKinney, TX financial advisors and retirement plan consultants are fiduciary advisors, meaning they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in McKinney, TX 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 McKinney, TX
You don't see your business as "just a business", and your McKinney, TX financial advisors must deliver more than basic financial recommendations. With Correct Capital, we take the time to get to know our clients and their businesses to provide tailored self-employed retirement plans. To every client in McKinney, TX, we provide our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To begin on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
