Self-employed retirement plans in Millstadt, IL. The freedom of running your own business in Millstadt, IL is a wonderful advantage to being self-employed. But that freedom can be accompanied by uncertainty, especially in in regards to saving for retirement, employer-sponsored plans aren't an option. Barely more than 10% of self-employed individuals have retirement plans they can contribute to, but many would be wise to look into their options. In addition to setting you up for the retirement of your dreams, working with a financial advisor to set up your self-employed retirement plan in Millstadt, IL offers tax benefits that can help free up much-needed funds for your business.
Only a handful of financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner than Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can read more about our story here). We have a deep understanding that your business and retirement aspirations go beyond just profit, and we are devoted to offering customized plans that fit your goals. Continue reading to learn more about your self-employed retirement plan options in Millstadt, IL, or call Correct Capital at 314-930-401(k) or contact us online to speak to a small business financial advisor now.
Types of Self-Employed Retirement Plans
There are many retirement savings plans that the self-employed can set up, and which is best for you depends on your unique situation. A Millstadt, IL financial advisor can help you understand the advantages and disadvantages of each option and opt for the most suitable one for your circumstances. Generally, your self-employed retirement plan options in Millstadt, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that offer specific tax advantages. If you deposit to a traditional IRA, deposits are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are liable to income tax. In contrast, Roth IRA contributions are made with after-tax income, but qualified distributions in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, distributions are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through an employer, traditional and Roth IRAs are available to 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. Since you are self-employed, you (the employee) have a contribution limit of no more than the 25% already contributed by you (the employer). If you have employees, they must receive the same amount you do. You can either contribute a flat-dollar amount or a percentage of annual income to employee accounts. SEP IRAs may be a suitable self-employed retirement plan if your business experiences cycles of high revenue and low revenue. SEP IRAs don't have the high upfront costs or administrative expenses often associated with other retirement plans.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and distributions are taxed at your income at the time of distribution.
Eligibility: Self-employed individuals and any employer, can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
For the self-employed individual, the annual contribution limit is based on 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 businesses with no employees or who only employ a spouse. Solo 401(k)s function similarly to employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers increased savings opportunities than some other retirement savings plans, however the additional opportunities for saving are often offset by having less investment options available. In an individual 401(k) plan, you can make either traditional or Roth deferrals, which each feature the same tax benefits as their IRA contribution counterparts.
Eligibility: Only self-employed individuals and their spouses can establish 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 a maximum 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) of 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.
The total contribution 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 upon retirement. In contrast to 401(k)s or IRAs, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and are willing to make substantial contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can establish an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn at least $250,000 a year. Those interested in defined benefit plans tend to be:
- Partners or owners who desire to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who want to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit must be determined by an actuary who calculates for your income, age, and retirement goals. Contribution limits change every year.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Millstadt, IL
A financial advisor in Millstadt, IL specialized in self-employed retirement plans can be an invaluable resource 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 advisor will evaluate where your finances currently are, understand your risk tolerance, and help you make smart decisions about saving and investing for retirement. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Personalize the plan to your needs even further
- Adopt a written plan that follows all IRS regulations
- 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 guidance as long as you work with us
- Increase your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Millstadt, IL: Correct Capital's Process
Millstadt, IL 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 strive to make meeting the golden years of your dreams as easy as we possibly can. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — We only need a brief 20-minute call for a member of our advisor team to know if we're suitable for you and your business. This brief introduction allows us to understand your needs with no major time investment for you.
- Gather Information — If we seem like a good fit, we'll ask for more info, including how many employees you have (if any), your current financial situation, and what kind of retirement you want to live. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over your plan in detail to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so you can start saving. As long as we work together, we'll meet with you and monitor your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and ethically bound to do what's best for you and only you. We are proud to provide clear communication and excellent service to help you achieve your self-employed retirement goals.
Other services we offer in Millstadt, IL include:
- 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
- Retirement Planning
Call Correct Capital for Your Millstadt, IL Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Millstadt, IL financial advisors need to provide you with more than merely sage financial advice. Correct Capital enjoys getting to know our clients and their business to deliver personalized self-employed retirement plans. We give all our Millstadt, IL 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 Millstadt, IL, speak to a financial advisor today at 314-930-401(k) or fill out our online form.