Self-employed retirement plans Pasadena, TX. The freedom of owning your own business in Pasadena, TX is one of the greatest advantages of being self-employed. Even so, this freedom often comes with a lack of security, notably in terms of building your retirement fund, because you don't have the benefit of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off looking into other possibilities. In addition to achieving a more secure retirement, seeking advice from a financial advisor in Pasadena, TX to establish your self-employed retirement plan delivers significant tax advantages that help your business to grow and succeed.
Few Pasadena, TX financial advisory and retirement planning firms are as attuned to the requirements of self-employed individuals quite like Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and our firm have a rich history of helping businesses with their retirement planning needs. We know that your business and retirement aspirations aren’t limited to basic numbers, and we work tirelessly to provide tailored solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Pasadena, TX, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a self-employed financial advisor in Pasadena, TX today.
Why Pasadena, TX Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide immediate benefits today. Offering flexibility in contributions to considerable tax savings, partnering with a financial advisor in Pasadena, TX allows you to create your retirement plan to align with your unique financial situation.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to modify how much you save:
- Customizable Contributions: Set aside more during high-income years and cut back when your earnings dip, so that your plan aligns with your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw your savings tax-free down the road—a smart decision if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, helping you keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, giving your money more time to compound.
- State-Specific Incentives: Based on your location, you might access additional credits as a self-employed individual. These local incentives make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can take advantage of a credit of up to 50% of the first $2,000 contributed a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across a mix of asset classes like stocks and bonds is a smart way to reduce risk while continuing to build your savings.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t dipping into savings during challenging periods and facing tax penalties.
Plan for the Future of Your Pasadena, TX Business
A thoughtful retirement strategy enables you to plan ahead for what’s next with your Pasadena, TX business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and won’t be included in the sale. These savings ensure the financial stability you’ll need in the future. It’s important to note that while selling your business results in a capital gain, retirement plan contributions are subject to yearly maximums (e.g., a maximum of $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you might face when you pass on your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts ensure the funds you need during the change. You may also seek advice from a financial advisor with expertise in succession and retirement planning to reduce taxes during the sale.
With the proper savings strategy, you can take control of your financial future, lower your tax bill, and create a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Pasadena, TX Now?
Time is one of the most crucial assets when it comes to saving for retirement. Beginning sooner rather than later not only lets you accumulate a bigger financial cushion but also lowers the stress of saving aggressively in the future. The following are reasons why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement may cause 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, in turn, accumulate even more returns. The greater time span your money has to grow, the greater the impact of this compounding process.
Example: Taylor and Alex are both entrepreneurs. Their shared goal is to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently may result in impressive growth. Here’s a simple scenario showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an projected 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 shortfall of over $260,000, all because of a 10-year delay.
Saving early, the less effort required each year to achieve your retirement goals.
*These calculations are estimates calculated using NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. This information is meant to provide general guidance and are not a promise of future results. Actual results may vary due to elements like market conditions, fees, and your unique situation. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Pasadena, TX, it is often the case that you focus more on reinvesting in your business rather than saving for retirement. However, initiating a plan now allows you to:
- Take advantage of tax-deferred growth or tax-free withdrawals in the future.
- Enjoy contribution flexibility that align with your earnings.
- Create a long-term safety measure that offers peace of mind, no matter how your business develops.
Getting started now, the less you’ll be required to worry about making up for lost time later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the freedom to concentrate on your objectives—both for your future retirement and your Pasadena, TX business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for entrepreneurs in Pasadena, TX, each offering its own pros and cons. A financial advisor will guide you to understand the pros and cons of each option and determine the one best suited for your circumstances. In most cases, your self-employed retirement plan options in Pasadena, TX are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that offer distinct tax benefits. In a conventional IRA, the money you contribute is often tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxable. In contrast, Roth IRA contributions are made with after-tax income, but qualified withdrawals in retirement, including earnings, are not taxed. In both cases, withdrawals come without penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, both traditional and Roth IRAs are accessible for individuals with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that permits self-employed individuals to set aside a portion of their self-employment income. Contributions can only be made by an employer, so, as a independent business owner, you (the employee) cannot make additional contributions beyond the 25% you (the employer) allocate. If you have employees, you must contribute the same amount for them as you do for yourself. You may choose to contribute a set monetary value or a percentage of wages to employee accounts. SEP IRAs is a good option for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs operate like traditional IRAs, where the contributions are tax-deferred and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for businesses with no employees or when the sole employee is your spouse. Solo 401(k)s are similar to standard 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This offers more savings versus SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses are eligible to open 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:
- Deferrals as an employee of up to 100% of your earned income from self-employment, up to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 for those who turn 60-63 in 2025.
- Profit-sharing contributions (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 deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan represents a type of retirement plan that guarantees a set amount to business owners upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know the precise amount they'll get in retirement. This option is ideal for high-earning professionals who aim to accumulate a significant sum for retirement and are prepared to contribute substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income during retirement.
Eligibility: Self-employed professionals operating a solo business or with a small staff of under five may establish an individual defined benefit plan, but it's most commonly advised for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans are:
- Partners or owners who want to invest more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% and are willing to do more
- Organizations with proven consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution must be determined by an actuary based on your earnings, age, and retirement objectives. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Pasadena, TX for Your Self-Employed Retirement Plan
Working with a financial advisor in Pasadena, TX focused on self-employed retirement strategies is an essential partner for entrepreneurs. They have the expertise to help understand the intricacies of saving for retirement and craft a tailored strategy that reflects your aspirations. An expert in your area will assess where you stand financially, understand your risk tolerance, and guide you in selecting the best options about saving and investing for retirement. Part of what we do for you includes:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Tailor the plan to fit you personally even further
- Adopt a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Review and modify your plan as needed
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Pasadena, TX: Correct Capital's Process
Entrepreneurs in Pasadena, TX who aren’t equipped with the time or understanding to manage their own retirement planning themselves may end up overwhelmed by their choices. With Correct Capital, our Pasadena, TX financial advisors take on the bulk of your retirement strategy for you, and strive to ensure meeting your future savings targets as easy as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can determine if we're suited to your needs for you and your business. This short conversation lets us learn about your needs with no pressure or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll request information, including your employee count, your current financial situation, and your future objectives. This enables us to craft a personalized strategy suited specifically for your needs.
- Review Your Plan: When we finalize a plan based on the information you provide, we'll schedule a meeting and go over your plan step by step to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll implement the necessary steps so you can begin contributing. As time goes on, we'll check in and monitor your plan to keep it tailored to your evolving circumstances.
Our Pasadena, TX financial advisors and retirement plan consultants act as fiduciary advisors, who are obligated to they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Pasadena, TX include:
- Investment Management
- 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 Pasadena, TX
Your business isn't "just a business" to you, and your Pasadena, TX 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 provide personalized self-employed retirement plans. All our clients in Pasadena, TX benefit from our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To begin on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
