Self-employed retirement plans in O'Fallon, IL. The flexibility involved with running your own business in O'Fallon, IL is one of the great things about working for yourself. But increased leeway can come with uncertainty, especially in when it comes to building a retirement plan, employer-sponsored plans aren't an option. Only 13% of self-employed individuals have a workplace retirement plan, but many would be wise to look into what plans are available. In addition to setting you up for the retirement of your dreams, partnering with a financial advisor to get started and maintain your self-employed retirement plan in O'Fallon, IL offers favorable tax incentives that can help you improve your bottom line.
Only a handful of financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can learn more about our story on our website). We have a deep understanding that your business and retirement aspirations extend far beyond mere monetary figures, and we are dedicated to providing personalized plans that reflect your goals. Continue reading to learn more about your self-employed retirement plan options in O'Fallon, IL, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team at your convenience.
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Types of Self-Employed Retirement Plans
There are a few different retirement savings plans available for self-employed individuals, each with its own set of benefits and considerations. A O'Fallon, IL financial advisor can help you grasp the benefits and drawbacks of each option and opt for the most suitable one for your specific needs. Generally, your self-employed retirement plan options in O'Fallon, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are investment accounts that allows you to set aside money for the future, with special tax considerations. In a traditional IRA, contributions are deducted from your taxable income, and investment earnings grow tax-deferred, but distributions in retirement are subject to income tax. In contrast, Roth IRA payments are made with after-tax income, but you pay no taxes on withdrawals or earnings. In both a traditional an a Roth IRA, withdrawals 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 portion 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, you must contribute an equal amount to their plans. You can either contribute a flat-dollar amount or a percentage of annual income to employee accounts. SEP IRAs may be a good 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 deposits are made with money you've yet to pay taxes on and distributions are taxed at your income at the time of distribution.
Eligibility: Any employer, including the self-employed, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the amount eligible to be contributed is based on a unique calculation.
Solo 401(k)
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 sole proprietors or those who only employ a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can make contributions as an employee and on your own behalf as the employer. This offers greater potential for savings than SEPs or IRAs, however the possibility of greater retirement savings is often counteracted by having less investment options available. In an individual 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax benefits as their IRA contribution counterparts.
Eligibility: Only self-employed individuals 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 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) which cannot exceed a maximum of 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 a fixed benefit to self-employed individuals after they've left the workforce. As opposed to 401(k)s or IRAs, a defined benefit plan doesn't oscillate because of investment gains, but allows self-employed people to know exactly how much they'll get in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a large amount for retirement and want to make significant contributions. Contributions are tax deferred and contributions are taxed as income 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 recommended 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 want to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who want to make up for earlier years when they didn't save as much
Contribution Limits: The contribution limit is calculated by an actuary who calculates for your income, age, and retirement goals. Contribution limits change annually.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in O'Fallon, IL
A financial advisor in O'Fallon, IL specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the experience to help you navigate the complexities of retirement planning and develop a personalized approach that gets you where you want to go. A financial advisor will look at where your finances currently are, adjust for your risk tolerance, and guide you in making informed decisions about your financial future. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan that follows all IRS guidelines
- 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 support as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in O'Fallon, IL: Correct Capital's Process
O'Fallon, IL business owners without the time, desire, or knowledge to handle their self-employed retirement plan themselves can become stressed with the different options available to them. At Correct Capital, our financial advisors handle the bulk of the retirement planning work on your behalf, 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 — It only takes a brief 20-minute call for one of our advisors to know if we're the best firm to help you reach your goals. This short introduction allows us to get a feel for your needs with no major time investment for you.
- Gather Information — If we seem like a good fit, we'll request more info, including how many employees you have (if any), your current financial situation, and your retirement goals. This allows us to put together a personalized plan 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 discuss your plan in detail to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so you can start saving. Throughout our relationship, we'll meet with you and adjust your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's in your best interest. We pride ourselves in providing clear communication and top-notch service to assist you reach your self-employed retirement goals.
Other services we offer in O'Fallon, IL include:
Call Correct Capital for Your O'Fallon, IL Self-Employed Retirement Plan
Your business isn't merely a business to you, and your O'Fallon, IL financial advisors need to offer more than just sage financial advice. Correct Capital takes pride in getting to know our clients and what makes them and their business tick to deliver tailored self-employed retirement plans. We offer all our O'Fallon, 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 O'Fallon, IL, call Correct Capital today at 877-930-4015 or contact us online.
