Self-employed retirement plans Naperville, IL. The freedom of being your own boss in Naperville, IL offers many benefits of being self-employed. Even so, this flexibility often comes with certain challenges, notably in terms of retirement savings, because you don't have the option of retirement programs through an employer. 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 comfortable retirement, working with a financial advisor in Naperville, IL to set up your self-employed retirement plan can provide significant tax advantages that enable your business to grow and succeed.
Few Naperville, IL financial advisory and retirement planning firms understand the needs of self-employed individuals as well as Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (check out our story here), and our firm are deeply experienced in supporting entrepreneurs with their retirement planning needs. We understand that your business and retirement aspirations go far beyond simple financial figures, and we strive to offer personalized solutions to meet your unique goals. Keep reading to learn more about your self-employed retirement plan options in Naperville, IL, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a self-employed financial advisor in Naperville, IL today.
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Why Naperville, IL Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also offer tangible benefits today. With customizable contribution options to considerable tax savings, partnering with a financial advisor in Naperville, IL helps you customize your retirement plan to suit 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) provides the flexibility to modify how much you save:
- Customizable Contributions: Contribute more during profitable years and reduce savings when your earnings dip, ensuring your plan aligns with your current income.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw tax-free later—a wise move if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed provide valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, which gives your money more time to grow.
- State-Specific Incentives: Based on your location, you might access state-specific deductions as a sole proprietor. These state-level incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across different stocks, bonds, and alternatives can help minimize exposure to risk while continuing to build your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t using your retirement funds during financial hardships and risking extra costs.
Plan for the Future of Your Naperville, IL Business
A thoughtful retirement strategy also helps you think through what’s next with your Naperville, IL business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s stay in your name and won’t be included in the sale. These plans offer the financial stability you’ll need in the future. Keep in mind that while selling your business results in a capital gain, deposits into these plans are capped at annual limits (e.g., up to $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings helps lower the taxes you might face when you sell your business.
- Succession Planning: For those winding down or handing over their business, your nest egg ensure the funds you need as you make this shift. You can also work with a financial advisor with expertise in succession and retirement planning to help with taxes during the sale.
With the proper savings strategy, you manage your financial future, cut down your tax obligations, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Naperville, IL Now?
Time remains 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 stress of playing catch-up as you get older. The following are reasons why it pays to take action now:
The Cost of Waiting
Waiting to start your retirement fund can have a substantial impact on the total you’ll have when you stop working. The main reason is compound interest—the concept where your investments earn returns, and those returns, then, accumulate even more returns. The more time your money has to grow, the larger the effect of this compounding process.
Example: Taylor and Alex are both self-employed individuals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until 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 ends up with $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time often create impressive growth. Consider this example showing the effect of consistent growth:
- 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: Contributing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, all because of a 10-year delay.
Saving early, the less you need to save each year to reach your retirement goals.
*The numbers shown in this scenario are based on estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are meant to provide general guidance and cannot predict actual future outcomes. Outcomes may change due to factors such as market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
For self-employed individuals in Naperville, IL, it is often the case that you focus more on reinvesting in your business over saving for retirement. However, beginning a plan now allows you to:
- Leverage tax-deferred growth or tax-free withdrawals later on.
- Benefit from adjustable savings that align with your earnings.
- Build a financial cushion that offers peace of mind, no matter how your business evolves.
The sooner you start, the less you’ll be required to worry about making up for lost time later in life. Building your retirement savings today means managing your financial future and allowing yourself the freedom to focus on your goals—both for your retirement years and your Naperville, IL business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for entrepreneurs in Naperville, IL, each with its own advantages and considerations. A financial advisor will guide you to understand the advantages and disadvantages of each choice and determine the one ideal for your needs. In most cases, your self-employed retirement plan options in Naperville, IL are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that include key tax perks. In a conventional IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but retirement distributions are taxed as income. In contrast, with Roth IRAs, you contribute using income already taxed, but qualified withdrawals in retirement, including earnings, are tax-free. In both cases, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are accessible for individuals with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that allows self-employed individuals to save a percentage of their net business profits. Contributions must come from an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions more than the 25% you (the employer) have designated. If you have employees, you must contribute the same amount for them as you do for yourself. You have the flexibility to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA is a good option for entrepreneurs facing periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs work like traditional IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Both employers and self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan intended for businesses with no employees or if the only employee is your spouse. Solo 401(k)s function similarly to standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This allows for more savings than SEPs or IRAs; however, the additional opportunities can be balanced by more restricted investment choices. In a solo 401(k) 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 are eligible to open 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:
- Employee contributions of up to 100% of your self-employment income, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 25% of your net self-employment income, 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 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that delivers a pre-established payout to self-employed individuals upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but lets individuals clearly understand the precise amount they'll have in retirement. This strategy is best suited for wealthier professionals who are focused on saving a large amount for retirement and can commit to making substantial contributions. Contributions are tax deferred, and withdrawals are taxed as income upon retirement.
Eligibility: Self-employed professionals operating a solo business or with a small staff of under five are eligible to open an individual defined benefit plan, but it's most commonly advised for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans include:
- Partners or owners who want to invest more than $70,000 (or $77,500 for individuals 50 and older)
- Organizations that already put in 3-4% and are willing to do more
- Companies showing consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution requires calculation from an actuary based on your earnings, age, and retirement objectives. Limits on contributions are adjusted each year.
The Importance of a Financial Advisor in Naperville, IL for Your Self-Employed Retirement Plan
Partnering with an advisor in Naperville, IL focused on self-employed retirement strategies can be an invaluable resource for entrepreneurs. They bring the skills needed to navigate the complexities of retirement planning and craft a customized plan that matches your objectives. Your advisor in Naperville, IL will review your finances, understand your risk tolerance, and assist you in choosing wisely about saving and investing for retirement. Part of what we do for you features:
- Assist in selecting a plan that best fits your needs and goals
- Further adapt the plan to your needs even further
- Create a written plan in accordance with IRS guidelines
- Organize a trust plan to manage your assets
- 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
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in Naperville, IL: Correct Capital's Process
Entrepreneurs in Naperville, IL who aren’t equipped with the time or understanding to manage their self-employed retirement plan independently can become overwhelmed as they look at their choices. With Correct Capital, our Naperville, IL financial advisors take on the bulk of your savings plan setup for you, working to make meeting your financial objectives as straightforward as possible for you. We can help you get set up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can determine if we're a good fit for you and your business. This brief introduction helps us learn about your needs with no obligation or extensive time commitment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including how many employees you have (if any), your existing financial picture, and your future objectives. This allows us to put together a tailored approach designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll sit down with you and review your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll implement the necessary steps so you can start saving. As time goes on, we'll have regular meetings and review your strategy to ensure it stays suited to your needs.
Our Naperville, IL financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Naperville, IL 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 Naperville, IL
Your business isn't "just a business" to you, and your Naperville, IL 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 create personalized self-employed retirement plans. To every client in Naperville, IL, 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, contact Correct Capital now at 877-930-401k or contact us online.
