Self-employed retirement plans in O'Fallon, MO. The freedom of having your own business in O'Fallon, MO is a wonderful advantage to being self-employed. But increased leeway can be accompanied by limited stability, particularly in in regards to saving for retirement, employer-sponsored plans aren't an option. Only a fraction of self-employed individuals have a workplace retirement plan, but many would be better off exploring what plans are available. In addition to setting you up for the golden years of your dreams, partnering with a financial advisor to get started and maintain your self-employed retirement plan in O'Fallon, MO offers favorable tax incentives that can help boost you and your business forward.
Not many wealth management and retirement planning firms know what it's like to be self-employed or a small business owner more than 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 know that your business and retirement aspirations go beyond spreadsheets and percentages, and we are committed to providing customized solutions that fit your goals. Continue reading to learn more about your self-employed retirement plan options in O'Fallon, MO, or call Correct Capital at 314-930-401(k) or contact us online to speak to a member of our advisory team at your convenience.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings options available for self-employed individuals, and which is best for you depends on your unique situation. A O'Fallon, MO financial advisor can help you understand the advantages and disadvantages of each option and select that works best for you. Typically, your self-employed retirement plan options in O'Fallon, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that allows you to set aside money for the future, with special tax considerations. If you deposit to a traditional IRA, deposits are typically tax-deductible, and any gains on investments grow tax-deferred, but distributions in retirement are taxed as if it were income. In contrast, Roth IRA deposits are made with money you've already paid taxes on, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, distributions are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through 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 their net earnings from self-employment. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 25%. If you have employees, you would have to contribute the same amount for them as you do for yourself. You can either contribute either a predetermined fixed dollar amount or a proportion of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that go through fluctuating income periods. SEP IRAs don't have the high upfront costs or administrative expenses often associated with other retirement plans.
SEPs work like traditional IRAs, where payments are made with money you've yet to pay taxes on and withdrawals are taxed at your income at the time of withdrawal.
Eligibility: Self-employed individuals and any employer, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
For the self-employed individual, the amount eligible to be contributed is decided by a special calculation.
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 whose only employee is a spouse. Solo 401(k)s work about the same as employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers more savings than SEPs or IRAs, however the possibility of greater retirement savings is often counteracted by more limited investment options. In a one-participant 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 business owners and their spouses have access to one-participant 401(k)s.
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) 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 offers a an assured monthly figure to self-employed individuals after they've left the workforce. As opposed to other types of retirement plans, a defined benefit plan doesn't fluctuate because of investment gains, 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 want to make substantial contributions. Contributions are tax deferred and contributions are taxed as income in retirement.
Eligibility: Any self-employed individual who runs a business where they're the only owner or has less than five employees can open an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who desire to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit must be calculated by an actuary based on 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, MO
A financial advisor in O'Fallon, MO specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the know-how to help you understand the complexities of retirement planning and develop a personalized approach that aligns with your goals. A financial planner will analyze your financial situation, adjust for your risk tolerance, and help you make sound 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
- Tailor the plan to your needs even further
- Adopt a written plan in accordance with 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
- Maximize your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in O'Fallon, MO: Correct Capital's Process
O'Fallon, MO business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become burdened when looking at their options. At Correct Capital, our financial advisors handle the bulk of the retirement planning work on your behalf, and endeavor to make achieving your business and retirement aspirations as simple as possible for you. We can help you establish and maintain your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need a short 20-minute call for a member of our advisor team to know if we're suitable for you and your business. This short introduction allows us to get a feel for your needs with no obligation on your part.
- Gather Information — If we both decide to move forward, we'll ask for more info, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to live. This allows us to put together a custom plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and discuss the specifics of your plan to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so your savings can start growing immediately. Throughout your time working with us, we'll meet with you and monitor your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and ethically obligated to do what's in your best interest. We are proud to provide straightforward communication and excellent service to assist you reach your self-employed retirement goals.
Other services we offer in O'Fallon, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
Call Correct Capital for Your O'Fallon, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your O'Fallon, MO financial advisors need to provide you with more than simply wise financial advice. Correct Capital enjoys getting to know our clients and their business to deliver tailored self-employed retirement plans. We offer all our O'Fallon, MO 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, MO, call Correct Capital today at 314-930-401(k) or contact us online.