Self-employed retirement plans Naperville, IL. The flexibility of being your own boss in Naperville, IL is one of the greatest advantages of working for yourself. However, this freedom can come with certain challenges, notably regarding building your retirement fund, because you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off looking into other possibilities. In addition to achieving a financially stable retirement, seeking advice from a financial advisor in Naperville, IL to set up your self-employed retirement plan offers significant tax advantages that enable your business to grow and succeed.
Few Naperville, IL wealth management and retirement planning firms understand the needs of small business owners quite like Correct Capital. The father of our founder 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 know that your business and retirement aspirations extend well past simple financial figures, and we are dedicated to provide personalized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Naperville, IL, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a entrepreneurial financial advisor in Naperville, IL today.
Why Naperville, IL Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also provide tangible benefits today. Offering flexibility in contributions to considerable tax savings, partnering with a financial advisor in Naperville, IL enables you to design your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) offers the flexibility to adjust how much you save:
- Customizable Contributions: Save extra during high-income years and reduce savings when income is lower, ensuring your plan aligns with your financial situation.
- Roth Options: A Roth Solo 401(k) lets you handle taxes upfront, so you can 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 significant 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: Investments grow tax-free until withdrawal, providing your money more time to compound.
- State-Specific Incentives: Based on your location, you may be eligible for state-specific deductions as a sole proprietor. These state-level incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Spreading your investments across different stocks, bonds, and other assets serves to 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 using your retirement funds during tough times and incurring penalties.
Plan for the Future of Your Naperville, IL Business
Preparing for retirement also helps you plan ahead for 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 remain your personal assets and don’t transfer with the business. These plans ensure the financial stability you’ll need in the future. Remember that while selling your business results in a capital gain, retirement plan contributions are subject to yearly maximums (e.g., a maximum of $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you’ll owe when you sell your business.
- Succession Planning: For those winding down or handing over their business, your retirement savings offer financial security as you make this shift. You might want to seek advice from a financial advisor with expertise in succession and retirement planning to reduce taxes during the sale.
With the best-fit retirement strategy, you can take control of your financial future, cut down your tax obligations, and build a strong framework 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 important assets when it comes to saving for retirement. Beginning sooner rather than later not only lets you accumulate a more substantial retirement fund but also reduces the pressure of saving aggressively in the future. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement can have a significant impact on the savings you’ll have when you stop working. The biggest reason is compound interest—the financial principle where your investments grow, and those returns, then, accumulate even more returns. The more time your money has to grow, the greater the effect of this growth.
Example: Two individuals, Alex and Taylor are both self-employed professionals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but puts away $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 contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time can lead to significant growth. Here’s a simple scenario showing the power of consistent growth:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an average annual return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month yields only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
The earlier you begin, the lower your annual savings needs each year to achieve your retirement goals.
*These calculations represent estimates generated with NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. This information is for illustrative purposes only and do not guarantee future performance. Outcomes may change based on factors such as market conditions, fees, and personal factors. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Naperville, IL, it can be tempting to focus more on reinvesting in your business rather than saving for retirement. Even so, starting a plan now allows you to:
- Benefit from tax-free future growth or tax-free withdrawals down the road.
- Take advantage of contribution flexibility that adapt to your cash flow.
- Build a financial cushion that ensures stability, no matter how your business evolves.
Getting started now, the less you’ll have 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 opportunity to focus on your dreams—both for your retirement years and your Naperville, IL business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for self-employed individuals in Naperville, IL, each providing its own advantages and considerations. A financial advisor can help you understand the benefits and drawbacks of each plan and identify the one ideal for your needs. Generally speaking, your self-employed retirement plan options in Naperville, IL include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that provide specific tax advantages. In a conventional IRA, the money you contribute is often tax-deductible, 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 accounts, withdrawals come without penalties as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are available to anyone with taxable earnings.
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 permits self-employed individuals to contribute a percentage of their net earnings. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) would not be able to contribute beyond 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. 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 businesses that experience fluctuating revenue streams. Unlike other plans, SEP IRAs are free of costly startup or administrative fees.
SEPs operate like conventional IRAs, where the contributions are tax-deferred and money withdrawn is subject to income tax.
Eligibility: Any employer, including the self-employed can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 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: The Solo 401(k), also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed intended for companies that have no employees or where the only employee is a spouse. Solo 401(k)s are similar to employer-sponsored 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This offers more savings than SEPs or IRAs; however, the extra savings options may be offset 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: This plan is exclusively for business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you are allowed to make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employed earnings, subject 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 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.
Total contributions are capped at $70,000, or $77,500 for individuals aged 50+ (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans represents a type of retirement plan that delivers a pre-established payout to business owners upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but enables participants to determine the precise amount they'll have in retirement. This option is recommended for wealthier entrepreneurs who are focused on saving a substantial amount for retirement and are prepared to contribute larger deposits. Contributions grow tax-free until withdrawal, and withdrawals are taxable as income upon retirement.
Eligibility: Any self-employed individual running an owner-only business or with less than five employees may establish an individual defined benefit plan, but it's generally recommended for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans include:
- Entrepreneurs who aim to deposit 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 showing consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The contribution limit must be determined by an actuary determined by your income, age, and retirement goals. Limits on contributions change annually.
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 serves as an important asset for self-employed individuals. They have the expertise to help understand the intricacies of saving for retirement and craft a tailored strategy that matches your objectives. An expert in your area will review your finances, identify your risk preferences, and assist you in making informed decisions about saving and investing for retirement. Part of what we do for you features:
- Help you choose a plan that aligns with your objectives and circumstances
- Customize the plan to your needs 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 when necessary
- Offer continued financial education and guidance as you continue on the road to retirement
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in Naperville, IL: Correct Capital's Process
Naperville, IL business owners who aren’t equipped with the time or understanding to manage their retirement savings strategy independently may end up overwhelmed by their choices. At Correct Capital, our Naperville, IL financial advisors handle the bulk of your retirement strategy for you, and strive to ensure meeting your future savings targets as easy as possible for you. We are here to assist you in setting up your self-employed retirement plan in four simple steps:
- 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 lets us learn about your needs with no pressure or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll gather information, including whether you have employees, your existing financial picture, and your long-term savings targets. This helps us create a personalized strategy suited specifically for your needs.
- Review Your Plan: After we put together a plan based on the information you provide, we'll meet with you and review your plan step by step to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can start saving. Throughout our relationship, we'll check in and track your progress to make sure it remains aligned with your goals.
Our Naperville, IL financial advisors and retirement plan consultants serve as fiduciary advisors, which means they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Naperville, IL 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 Naperville, IL
You don't see your business as "just a business", and your Naperville, IL financial advisors must deliver more than basic financial recommendations. With Correct Capital, we focus on building a relationship with our clients and their businesses to provide customized self-employed retirement plans. We offer all our Naperville, IL clients 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.
