Self-employed retirement plans Modesto, CA. The flexibility of running your own company in Modesto, CA is one of the best aspects of being self-employed. Even so, this independence sometimes brings with certain challenges, particularly in terms of building your retirement fund, as you don't have the benefit of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off understanding their retirement options. In addition to enjoying a more secure retirement, working with a financial advisor in Modesto, CA to create your self-employed retirement plan can provide significant tax advantages that allow your business to grow and succeed.
Few Modesto, CA wealth management and retirement planning firms understand the needs of small business owners better than Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and Correct Capital take pride in assisting business owners in their retirement planning needs. We understand that your business and retirement aspirations go far beyond simple financial figures, and we are dedicated to offer tailored solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Modesto, CA, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a entrepreneurial financial advisor in Modesto, CA today.
Why Modesto, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide tangible benefits today. With customizable contribution options to considerable tax savings, consulting a financial advisor in Modesto, CA allows you to create your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
When your earnings vary annually, a plan like a SEP IRA or Solo 401(k) offers the option to modify how much you save:
- Customizable Contributions: Save extra during successful years and reduce savings when revenues are down, so your plan works with your cash flow.
- Roth Options: Choosing a Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw your savings tax-free down the road—a wise move if you believe your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, giving your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you may be eligible for additional deductions as a business owner. These regional incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 put into a retirement plan, further reducing 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: Spreading your investments across a mix of stocks, bonds, and other assets serves to minimize exposure to risk while still growing your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a financial buffer for your business helps you avoid using your retirement funds during financial hardships and risking extra costs.
Plan for the Future of Your Modesto, CA Business
Preparing for retirement also helps you think through what’s next with your Modesto, CA business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These savings ensure the reliable income you’ll need later on. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are subject to yearly maximums (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you might face when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement savings ensure financial security through the transition. You may also partner with a financial advisor with expertise in succession and retirement planning to reduce taxes on the sale.
With the right retirement plan, you manage your financial future, lower your tax bill, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Modesto, CA Now?
Time remains one of the most crucial assets in retirement planning. Getting a head start not only allows you to build a larger nest egg but also minimizes the pressure of catching up later in life. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement could lead to a major impact on the total you’ll have when you stop working. The primary reason is compound interest—the financial principle where your investments generate earnings, and those returns, then, generate even more returns. The greater time span your money has to grow, the larger the impact of compounding.
Example: Alex and Taylor are both self-employed professionals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but puts away $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time can lead to substantial growth. Here’s a simple scenario showing the impact of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month leaves you with only $235,412.97* by age 65—a difference of over $260,000, just from a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*These calculations represent estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of 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 intended as illustrative examples and cannot predict actual future outcomes. Outcomes may change due to elements like market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Modesto, CA, it is often the case that you prioritize reinvesting in your business instead of saving for retirement. Even so, beginning a plan now enables you to:
- Leverage growth that is tax-deferred or withdrawals without taxes later on.
- Benefit from adjustable savings that align with your income.
- Create a financial cushion that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll be required to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and allowing yourself the freedom to turn your attention to your goals—both for your future retirement and your Modesto, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for those working for themselves in Modesto, CA, each providing its own pros and cons. A financial advisor is available to help you understand the pros and cons of each choice and identify the one most suitable for your circumstances. In most cases, your self-employed retirement plan options in Modesto, CA consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that provide distinct tax benefits. In a standard IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but withdrawals in retirement are taxable. In contrast, with Roth IRAs, you contribute from post-tax earnings, but qualified withdrawals in retirement, including earnings, are tax-free. In both types of accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, both traditional and Roth IRAs are available to anyone with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that enables entrepreneurs to save a percentage of their net business profits. Contributions are strictly employer contributions 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, it's required to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. A SEP IRA may be ideal for businesses that experience cycles of high revenue and low revenue. Unlike other plans, SEP IRAs lack expensive setup or ongoing fees.
SEPs operate like standard IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Both employers and 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 allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan designed for businesses without employees or when the sole employee is your spouse. Solo 401(k)s operate much like employer-sponsored 401(k) plans, and enable contributions as both an employee or an employer with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the extra savings options can be balanced by more constrained investment avenues. In a solo 401(k) plan, 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 can set up and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you can make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employed earnings, up to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 for those who turn 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 25% of your adjusted self-employment income, which is defined as net profit minus half of your self-employment tax and the employee contributions you made.
The total contribution cannot exceed $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that delivers a pre-established payout to self-employed individuals upon retirement. In contrast to the plans discussed earlier, this plan is not influenced by market performance, but enables participants to determine exactly how much they'll have in retirement. This plan is recommended for wealthier self-employed individuals who are focused on saving a significant sum for retirement and can commit to making larger deposits. Contributions are tax deferred, and withdrawals are taxed as income in retirement.
Eligibility: Entrepreneurs running an owner-only business or employing fewer than five people can open an individual defined benefit plan, but it's generally recommended for those over 50 who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans include:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Companies that have demonstrated consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The cap on contributions requires calculation from an actuary determined by your earnings, age, and retirement objectives. Limits on contributions change annually.
The Importance of a Financial Advisor in Modesto, CA for Your Self-Employed Retirement Plan
A financial advisor in Modesto, CA experienced with retirement plans for the self-employed can be an important asset for those working for themselves. They offer the knowledge to assist navigate the complexities of retirement planning and design a customized plan that aligns with your goals. Your advisor in Modesto, CA 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 involves:
- Guide you in choosing a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Create a written plan that complies with IRS regulations
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Monitor and adjust your plan when necessary
- Offer continued financial education and guidance throughout your retirement planning process
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Modesto, CA: Correct Capital's Process
Self-employed individuals in Modesto, CA who aren’t equipped with the time or understanding to manage their self-employed retirement plan themselves often feel overwhelmed when faced with their options. Through our team at Correct Capital, our Modesto, CA financial advisors take on the majority of your retirement strategy for you, to help make meeting your financial objectives as straightforward as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can determine if we're a good fit for you and your business. This initial call helps us understand what you're looking for with no pressure or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll gather information, including how many employees you have (if any), your existing financial picture, and your retirement goals. This enables us to craft a custom plan designed just for you.
- Review Your Plan: When we finalize a plan based on the information you provide, we'll sit down with you and discuss your plan in detail to ensure you understand it and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can begin contributing. Throughout our relationship, we'll meet with you and track your progress to keep it tailored to your evolving circumstances.
Our Modesto, CA financial advisors and retirement plan consultants are fiduciary advisors, which means they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Modesto, CA include:
- Family Wealth Planning
- 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
Call Correct Capital for Your Self-Employed Retirement Plan in Modesto, CA
You don't see your business as "just a business", and your Modesto, CA 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 deliver customized self-employed retirement plans. To every client in Modesto, CA, we provide our I.O.U. promise: all guidance we provide 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.
