Self-employed retirement plans Minneapolis, MN. The independence of running your own company in Minneapolis, MN is one of the best aspects of working for yourself. That said, this flexibility sometimes brings with certain challenges, notably regarding planning for retirement, 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 could benefit from exploring their options. In addition to enjoying a more secure retirement, working with a financial advisor in Minneapolis, MN to create your self-employed retirement plan delivers significant tax advantages that help both you and your business to thrive.
Few Minneapolis, MN wealth management and retirement planning firms truly grasp the challenges faced by entrepreneurs quite like Correct Capital. Our founder's father was a small business owner himself (check out our story here), and we have a rich history of supporting entrepreneurs with their retirement planning needs. We recognize that your business and retirement aspirations extend well past simple financial figures, and we work tirelessly to provide customized solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Minneapolis, MN, or call Correct Capital at 877-930-401k or contact us online to consult with a entrepreneurial financial advisor in Minneapolis, MN today.
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Why Minneapolis, MN Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also deliver tangible benefits today. With customizable contribution options to substantial tax savings, partnering with a financial advisor in Minneapolis, MN helps you customize your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) gives you the freedom to tailor how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when revenues are down, so your plan works with your financial situation.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw your savings tax-free down the road—a smart decision if you anticipate your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to grow.
- State-Specific Incentives: Based on your location, you may be eligible for state-specific deductions as a self-employed individual. These state-level incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can take advantage of a credit of up to 50% of the first $2,000 contributed a retirement plan, cutting down 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 linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of asset classes like stocks and bonds is a smart way to minimize exposure to risk while continuing to build your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business helps you avoid dipping into savings during challenging periods and facing tax penalties.
Plan for the Future of Your Minneapolis, MN Business
Preparing for retirement also helps you think through what’s next with your Minneapolis, MN business:
- Selling Your Business: When selling your business, plans like SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These savings can provide 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., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, depending on plan details).
- Minimizing Taxes: Making the most of retirement savings can reduce the taxes you might face when you pass on your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts provide a stable foundation during the change. You may also work with a financial advisor with expertise in succession and retirement planning to reduce taxes during the sale.
With the proper savings strategy, 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 Minneapolis, MN Now?
There’s no denying that time is one of the most important factors for building your retirement fund. Starting early not only lets you accumulate a more substantial retirement fund but also reduces the stress of saving aggressively in the future. This is why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund can have a significant impact on the amount you’ll have when you reach retirement age. The biggest reason is compound interest—the financial principle where your investments earn returns, and those returns, subsequently, earn even more returns. The longer your money has to grow, the larger the benefit of this growth.
Example: Alex and Taylor are both self-employed professionals. They each aim 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 puts away $7,500 annually to make up for lost time.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Small, consistent savings invested steadily may result in significant growth. Here’s a simple scenario showing the impact of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll end up with $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 gap of over $260,000, all because of a 10-year delay.
Saving early, the lower your annual savings needs each year to meet your retirement goals.
*These calculations are based on estimates calculated using NerdWallet’s Compound Interest Calculator, assuming 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 meant to provide general guidance and are not a promise of future results. Outcomes may change based on factors such as market conditions, fees, and your unique situation. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Minneapolis, MN, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. Even so, initiating a plan now allows you to:
- Leverage growth that is tax-deferred or withdrawals without taxes down the road.
- Benefit from contribution flexibility that align with your cash flow.
- Build a safety net that ensures stability, no matter how your business develops.
Getting started now, the less you’ll need to worry about catching up later in life. Saving for retirement now means managing your financial future and giving yourself the opportunity to concentrate on your goals—both for your retirement years and your Minneapolis, MN business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for entrepreneurs in Minneapolis, MN, each with its own advantages and considerations. A financial advisor will guide you to evaluate the benefits and drawbacks of each plan and determine the one best suited for your needs. In most cases, your self-employed retirement plan options in Minneapolis, MN consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that include key tax perks. In a conventional IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but retirement distributions are taxable. In contrast, with Roth IRAs, you contribute are made with after-tax income, but qualified withdrawals in retirement, including earnings, are not taxed. In both cases, withdrawals are penalty-free provided you are at least 59½.
Eligibility: Unlike plans linked to your job, traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that enables self-employed individuals 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) are limited to contributions from the employer role above the 25% you (the employer) have designated. If you have employees, it's required to contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan is a good option for companies with fluctuating revenue streams. Unlike other plans, SEP IRAs are free of expensive setup or ongoing fees.
SEPs function like standard IRAs, where you contribute pre-tax dollars and withdrawals are taxed as income.
Eligibility: Any employer, including the self-employed 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 contribution you can make 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 savings option for the self-employed meant for businesses without employees or when the sole employee is your spouse. This type of plan are similar to standard 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. 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 are eligible to open and contribute to a solo 401(k).
Contribution Limits: If you are self-employed 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 earned income from self-employment, up to the annual contribution limit. For 2025, the limits will be $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 net earnings from self-employment, which is your net profit minus half of your self-employment tax and the elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (as of 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan represents a type of retirement plan that delivers a set amount to entrepreneurs upon retirement. As opposed to defined contribution plans, 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 option is ideal for wealthier entrepreneurs who want to save a significant sum for retirement and can commit to making substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxable as income during retirement.
Eligibility: Any self-employed individual managing a one-person company or with less than five employees are eligible to open an individual defined benefit plan, but it's typically advised for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans are:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 for individuals 50 and older)
- Organizations that already put in 3-4% with plans to contribute more
- Businesses showing consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The contribution limit requires calculation from an actuary using your earnings, age, and retirement objectives. Limits on contributions are updated yearly.
The Importance of a Financial Advisor in Minneapolis, MN for Your Self-Employed Retirement Plan
A financial advisor in Minneapolis, MN experienced with retirement plans for the self-employed can be an important asset for those working for themselves. They have the expertise to help guide you through the challenges of retirement planning and design a customized plan that reflects your aspirations. Your advisor in Minneapolis, MN will evaluate your financial situation, determine how much risk you’re comfortable with, and assist you in making informed decisions about saving and investing for retirement. Part of what we do for you includes:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Tailor the plan to your specific situation even further
- Adopt a written plan that complies with IRS regulations
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Deliver continuous support and financial insights as you continue on the road to retirement
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Minneapolis, MN: Correct Capital's Process
Minneapolis, MN business owners who aren’t equipped with the time or understanding to oversee their own retirement planning themselves often feel overwhelmed as they look at their available plans. At Correct Capital, our Minneapolis, MN financial advisors take on the lion's share of your retirement strategy for you, working to make meeting your financial objectives as hassle-free as possible for you. We can help you get set 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 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: Once we mutually decide to continue, we'll gather information, including whether you have employees, your current financial situation, and your long-term savings targets. This enables us to craft a custom plan designed just for you.
- Review Your Plan: After we put together a plan from the information you provide, we'll sit down with you and review your plan step by step 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 meet with you and track your progress to make sure it remains aligned with your goals.
Our Minneapolis, MN financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are committed by law and ethics to prioritize your needs above all else.
Other financial advisory services we offer in Minneapolis, MN 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 Minneapolis, MN
To you, your business is more than "just a business", and your Minneapolis, MN financial advisors must deliver more than just good financial guidance. With Correct Capital, we take the time to get to know our clients and their businesses to deliver customized self-employed retirement plans. We offer all our Minneapolis, MN clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
