Self-employed retirement plans in O'Fallon, IL. The freedom of having your own business in O'Fallon, IL is one of the great things about working for yourself. But more leeway can come with uncertainty, particularly in when it comes to building a retirement plan, employer-sponsored plans aren't an option. Only 13% of self-employed people have a workplace retirement plan, but many would be wise to look into what plans are available. In addition to a more comfortable retirement, 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.
Not many wealth management and retirement planning firms know what it's like to be self-employed or a small business owner as well as Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can discover more about our story on our website). We have a deep understanding that your business and retirement aspirations transcend mere monetary figures, and we are committed to providing tailored plans that reflect where you are and where you want to go. Continue reading to learn more about your self-employed retirement plan options in O'Fallon, IL, or call Correct Capital at 314-930-401(k) or contact us online to speak to a small business financial advisor at your convenience.
What Self-Employed Retirement Plans Are There?
There are several retirement savings plans that the self-employed can establish, each with its own set of advantages and considerations. A O'Fallon, IL financial advisor can help you grasp the benefits and drawbacks of each option and select the most suitable one for your circumstances. Typically, your self-employed retirement plan options in O'Fallon, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that offer specific tax advantages. In a traditional IRA, contributions are deducted from your taxable income, and investment earnings grow tax-deferred, but withdrawals in retirement are subject to income tax. On the other hand, Roth IRA deposits are made with money you've already paid taxes on, but you pay no taxes on withdrawals or investment gains. In both accounts, withdrawals can be made without penalty if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs can be set up by anyone with an earned income.
Contribution Limits: For 2023, the maximum yearly contributions 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 share 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 would have to contribute the same amount for them as you do for yourself. You can either contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan for businesses that experience cycles of high revenue and low revenue. SEP IRAs don't have expensive initial setup or administrative charges often associated with other retirement plans.
SEPs work like traditional IRAs, where contributions are made with money you've yet to pay taxes on and withdrawals 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 the lesser of:
- 25% of compensation, or
For self-employed people, the amount eligible to be contributed is decided by a specific formula.
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 businesses with no employees or who only employ a spouse. Solo 401(k)s function similarly to employer-sponsored 401(k) plans, and you can make contributions as both an employer or employee with pre-tax money. This offers more savings than some other retirement savings plans, however the additional opportunities for saving are often counterbalanced by having less investment options available. In an individual 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only sole proprietors and their spouses can establish 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 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) of 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 predetermined monthly figure to self-employed individuals after they've left the workforce. In contrast to 401(k)s or IRAs, a defined benefit plan doesn't go up and down based on investment returns, but allows self-employed people to know exactly what they'll receive in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a substantial portion for retirement and are willing to add substantial contributions. Contributions are tax deferred and contributions are taxed as income in retirement.
Eligibility: Any self-employed individual who runs a business with no employees besides the owner or has less than five employees can establish an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn well into the six figures. 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 do more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they didn't save as much
Contribution Limits: The contribution limit must be determined by an actuary based on your income, age, and retirement goals. Contribution limits change annually.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in O'Fallon, IL
A financial advisor in O'Fallon, IL specialized in self-employed retirement plans can be indispensable for self-employed individuals. They have the experience to help you understand the complexities of retirement planning and create a tailored strategy that aligns with your goals. A financial advisor will assess your financial situation, understand your risk tolerance, and help you make smart decisions about saving and investing for retirement. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Personalize the plan to your needs even further
- Adopt a written plan that follows all IRS guidelines
- Arrange a trust plan for assets
- Create a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance as you continue on the road to retirement
- Maximize 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 who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become stressed when looking at their options. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work on your behalf, and endeavor to make achieving your business and retirement goals as easy as possible for you. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes a short 20-minute call for a member of our advisor team to understand if we're a good fit for you and your business. This brief introduction allows us to get a feel for your needs with no obligation for you.
- Gather Information — If we seem like a good fit, we'll request information, including how many employees you have (if any), your current finances, and what kind of retirement you want to have. This allows us to put together a custom plan suited specifically for your needs.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over your plan in detail to ensure you understand it.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so your savings can start growing immediately. As long as we work together, we'll meet with you and adjust your plan to ensure it stays suited to your needs.
Our financial advisors and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's best for you and only you. 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:
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
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 provide you with more than simply sound financial advice. Correct Capital enjoys getting to know our clients and their business to deliver customized 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, speak to a member of our team today at 314-930-401(k) or contact us through our website.