Self-employed retirement plans in O'Fallon, MO. The freedom of running your own business in O'Fallon, MO is a wonderful advantage to being self-employed. But that freedom can come with limited stability, especially in when it comes to saving for retirement, employer-sponsored plans aren't an option. Barely more than 10% of self-employed individuals have a workplace retirement plan, but many would be better off exploring their options. In addition to a more comfortable retirement, working with a financial advisor to set up your self-employed retirement plan in O'Fallon, MO offers favorable tax incentives that can help free up much-needed funds for your business.
Only a handful of wealth management and retirement planning firms will understand the needs of the self-employed and small business owners more than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can read more about our story here). We know that your business and retirement aspirations extend far beyond just profit, and we are dedicated to providing personalized plans that reflect your goals. Continue reading to read more about your self-employed retirement plan options in O'Fallon, MO, or call Correct Capital at 877-930-4015 or contact us online to speak to a small business financial advisor today.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings plans that the self-employed can set up, each with its own set of benefits and considerations. A O'Fallon, MO financial advisor can help you grasp the pros and cons of each option and opt for the most suitable one for your specific needs. Typically, your self-employed retirement plan options in O'Fallon, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that offer specific tax advantages. If you deposit to a traditional IRA, deposits are typically tax-deductible, and investment earnings grow tax-deferred, but distributions in retirement are subject to income tax. In contrast, Roth IRA contributions are made with money you've already paid taxes on, but you pay no taxes on withdrawals or earnings. In both a traditional an a Roth IRA, withdrawals are penalty-free 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 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 portion of of their annual income from self-employment. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. If you have employees, they must receive the same amount you do. You can either contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan if your business goes through periods of variable income. SEP IRAs don't have the high upfront costs or administrative expenses other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and distributions are taxed at your income at the time of withdrawal.
Eligibility: Any employer, including the self-employed, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
- $66,000
For self-employed people, the maximum amount you can contribute in a given year is decided by a special 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 businesses with no employees or whose only employee is a spouse. Solo 401(k)s function in the same same way as 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 counteracted by having less investment options available. In a solo 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 solo 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) 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.
On an annual basis, contributions 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 benefit to self-employed individuals upon retirement. As opposed to other types of retirement plans, a defined benefit plan doesn't fluctuate because of investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and are willing to make significant contributions. Contributions are tax deferred and withdrawals 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 open an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who desire 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 have demonstrated consistent profit patterns
- Partners or owners over age 40 who want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit must be calculated by an actuary who calculates for your income, age, and retirement goals. Contribution limits are adjusted every year.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in O'Fallon, MO
A financial advisor in O'Fallon, MO specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the knowledge to help you navigate the complexities of retirement planning and design a tailored strategy that aligns with your goals. A financial advisor will assess your financial situation, help you figure out your risk tolerance, and guide you in making informed decisions for yourself, both as a business owner and future retiree. 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 in accordance with IRS regulations
- 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 guidance 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, MO: Correct Capital's Process
O'Fallon, MO business owners who don't want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become burdened with the different plans available to them. At Correct Capital, our financial advisors handle the lion's share of your retirement planning for you, and endeavor to make achieving your retirement goals as easy as we possibly can. 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 understand your needs with no obligation for you.
- Gather Information — If we seem like a good fit, we'll ask for more info, including how many employees you have (if any), your current finances, and your retirement goals. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and discuss the details 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 you can start saving. Throughout our relationship, we'll keep you up-to-date with how things are going and adjust your plan to ensure it stays suited to 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 straightforward communication and excellent service to assist you attain 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
Call Correct Capital for Your O'Fallon, MO Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your O'Fallon, MO financial advisors need to offer more than simply wise financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver customized 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, speak to a member of our team today at 877-930-4015 or contact us through our website.
