Self-employed retirement plans Palmdale, CA. The independence of running your own company in Palmdale, CA is one of the best aspects of working for yourself. However, this flexibility often comes with potential drawbacks, notably in terms of building your retirement fund, since you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off understanding their retirement options. In addition to having a more secure retirement, partnering with a financial advisor in Palmdale, CA to set up your self-employed retirement plan offers significant tax advantages that enable your business to grow and succeed.
Few Palmdale, CA financial advisory and retirement planning firms truly grasp the challenges faced by entrepreneurs as well as Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (learn more about our story here), and we take pride in supporting entrepreneurs with their retirement planning needs. We understand that your business and retirement aspirations extend well past simple financial figures, and we work tirelessly to create personalized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Palmdale, CA, or call Correct Capital at 877-930-401k or contact us online to speak with a small business financial advisor in Palmdale, CA today.
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Why Palmdale, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also deliver real benefits today. With customizable contribution options to significant tax savings, partnering with a financial advisor in Palmdale, CA helps you design your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the option to tailor 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 current income.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw your savings tax-free down the road—a smart decision if you believe your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, which gives your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you could qualify for extra credits as a business owner. These local incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 contributed a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of stocks, bonds, and alternatives is a smart way to reduce risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net prevents you from dipping into savings during challenging periods and risking extra costs.
Plan for the Future of Your Palmdale, CA Business
Retirement planning enables you to plan ahead for what’s next with your Palmdale, CA business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and won’t be included in the sale. These plans ensure the financial stability you’ll need later on. It’s important to note that while selling a business often leads to a capital gain, deposits into these plans are capped at annual limits (e.g., up to $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: Strategically planning your contributions minimizes the taxes you’ll owe when you sell your business.
- Succession Planning: If you’re passing the business on, your nest egg provide financial security as you make this shift. You might want to partner with a financial advisor who specializes in succession planning and retirement accounts to help with taxes on the sale.
With the right retirement plan, you manage your financial future, reduce your tax burden, and create a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Palmdale, CA Now?
There’s no denying that time is one of the most crucial resources in retirement planning. Starting early not only lets you accumulate a bigger financial cushion but also minimizes the stress of saving aggressively in the future. Here’s why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement could lead to a substantial impact on the savings you’ll have when you reach retirement age. The primary reason is compound interest—the concept where your investments grow, and those returns, subsequently, generate even more returns. The more time your money has to grow, the more significant the effect of compounding.
Example: Two individuals, Alex and Taylor are both self-employed professionals. Both of them want to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but contributes $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently may result in substantial growth. Consider this example showing the effect of compounding:
- 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: Saving the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, all because of a 10-year delay.
Saving early, the less you need to save each year to achieve your retirement goals.
*These calculations are based on estimates derived from NerdWallet’s Compound Interest Calculator, based on a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. The scenarios provided are for illustrative purposes only and do not guarantee future performance. Outcomes may change due to factors such as market conditions, fees, and personal factors. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Palmdale, CA, it might seem easier to put more emphasis on reinvesting in your business instead of saving for retirement. That said, starting a plan now allows you to:
- Take advantage of tax-deferred growth or penalty-free withdrawals down the road.
- Enjoy contribution flexibility that change with your income.
- Establish a financial cushion that ensures stability, no matter how your business evolves.
The sooner you start, the less you’ll need to worry about catching up later in life. Saving for retirement now means gaining control over your financial future and creating for yourself the ability to focus on your goals—both for your golden years and your Palmdale, CA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for entrepreneurs in Palmdale, CA, each with its own pros and cons. A financial advisor is available to help you evaluate the advantages and disadvantages of each choice and identify the one ideal for your unique situation. Typically, your self-employed retirement plan options in Palmdale, CA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that provide distinct tax benefits. In a standard IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but retirement distributions are taxed as income. In contrast, with Roth IRAs, you contribute from post-tax earnings, but eligible distributions during retirement, including earnings, are tax-free. In both types of accounts, withdrawals are penalty-free as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs is a retirement plan that permits those who are self-employed to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a sole proprietor, you (the employee) would not be able to contribute beyond the 25% you (the employer) have designated. If you have employees, you must contribute the same amount for them as you do for yourself. You have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs is a good option for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs don’t have costly startup or administrative fees.
SEPs function like standard IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan intended for businesses with no employees or when the sole employee is your spouse. These plans are similar to employer-sponsored 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This allows for more savings than SEPs or IRAs; however, the increased savings potential often come with more constrained investment avenues. 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: Only business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you can make two types of contributions:
- Deferrals as an employee of up to 100% of your earned income from self-employment, subject to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you're over 50, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your adjusted self-employment income, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
Your combined contributions must not surpass $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: The defined benefit plan represents a type of retirement plan that provides a set amount to business owners upon retirement. In contrast to the plans discussed earlier, investment returns don’t affect the payout, but enables participants to determine the precise amount they'll have in retirement. This option is best suited for wealthier self-employed individuals who are focused on saving a large amount for retirement and are prepared to contribute sizeable contributions. Contributions are tax deferred, and withdrawals are taxable as income during retirement.
Eligibility: Entrepreneurs running an owner-only business or with less than five employees may establish an individual defined benefit plan, but it's typically advised for people above age 50 who make $250,000 or more annually. Generally, good candidates for defined benefit plans include:
- Partners or owners who desire to contribute more than $70,000 (or $77,500 for individuals 50 and older)
- Organizations that already put in 3-4% and are willing to do more
- Organizations with proven consistent profit patterns
- Partners or owners over age 40 who wish to accelerate savings or boost savings within a short timeframe
Contribution Limits: The cap on contributions requires calculation from an actuary determined by your income, age, and retirement goals. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Palmdale, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Palmdale, CA experienced with retirement plans for the self-employed serves as an essential partner for self-employed individuals. They offer the knowledge to assist guide you through the challenges of retirement planning and develop a tailored strategy that aligns with your goals. A financial advisor in Palmdale, CA will evaluate your financial situation, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you features:
- Help you choose a plan that suits your unique requirements
- Tailor the plan to fit you personally even further
- Adopt a written plan as required by IRS rules
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Track and fine-tune your plan as needed
- Deliver continuous support and financial insights throughout your retirement planning process
- Boost your retirement earnings by maximizing your social security benefits
Self-Employed Retirement Plans in Palmdale, CA: Correct Capital's Process
Self-employed individuals in Palmdale, CA who don’t have the time or expertise to oversee their own retirement planning themselves often feel overwhelmed when faced with their choices. With Correct Capital, our Palmdale, CA financial advisors take on the majority of your retirement strategy for you, working to make meeting your financial objectives as hassle-free as possible for you. We can help you get set up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction lets us get a sense of your goals with no obligation or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including how many employees you have (if any), your present financial standing, and your future objectives. This enables us to craft a custom plan suited specifically for your needs.
- Review Your Plan: When we finalize a plan from the information you provide, we'll schedule a meeting and review your plan thoroughly to help you fully grasp it and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll put everything in place so you can start saving. As time goes on, we'll have regular meetings and monitor your plan to ensure it stays suited to your needs.
Our Palmdale, CA financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Palmdale, CA include:
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
- Fiduciary Financial Advisor
Call Correct Capital for Your Self-Employed Retirement Plan in Palmdale, CA
Your business isn't "just a business" to you, and your Palmdale, CA financial advisors need to offer more than basic financial recommendations. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to create customized self-employed retirement plans. All our clients in Palmdale, CA benefit from our I.O.U. promise: everything we recommend 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.
