Self-employed retirement plans Paterson, NJ. The independence of running your own company in Paterson, NJ is one of the greatest advantages of working for yourself. However, this independence can come with a lack of security, especially in terms of retirement savings, since you don't have the option of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off exploring their options. In addition to having a more secure retirement, working with a financial advisor in Paterson, NJ to set up your self-employed retirement plan delivers significant tax advantages that help you to move your business forward.
Few Paterson, NJ financial advisory and retirement planning firms are as attuned to the requirements of small business owners better than Correct Capital. Our company’s founder grew up with a father who 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 understand that your professional and personal aspirations go far beyond basic numbers, and we work tirelessly to create personalized solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in Paterson, NJ, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a entrepreneurial financial advisor in Paterson, NJ today.
Schedule a Meeting With an Advisor Today
Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
Schedule a 15-Minute Introductory Call
Why Paterson, NJ Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also provide tangible benefits today. Offering flexibility in contributions to significant tax savings, working with a financial advisor in Paterson, NJ allows you to design your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) gives you the freedom to tailor how much you save:
- Customizable Contributions: Contribute more during successful years and scale back when income is lower, ensuring your plan fits your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw tax-free later—a smart decision if you expect your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, so you can keep more of your earnings.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, which gives your money more time to grow.
- State-Specific Incentives: Based on your location, you might access extra credits as a self-employed individual. These regional incentives can make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can take advantage of a 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
Creating a stable future requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and alternatives is a smart way to mitigate financial risk while continuing to build your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net ensures you don’t dipping into savings during financial hardships and risking extra costs.
Plan for the Future of Your Paterson, NJ Business
A thoughtful retirement strategy can assist you prepare for what’s next with your Paterson, NJ business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and don’t transfer with the business. These savings offer the reliable income you’ll need during retirement. Keep in mind that while the sale of a business usually creates a capital gain, contributions to retirement accounts are capped at annual limits (e.g., as much as $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you might face when you transfer your business.
- Succession Planning: If you’re passing the business on, your retirement savings offer a stable foundation through the transition. You might want to work with a financial advisor experienced in both succession and retirement strategies to reduce taxes associated with the transaction.
With the right retirement plan, you manage 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 Paterson, NJ Now?
Time is one of the most valuable factors when it comes to saving for retirement. Beginning sooner rather than later not only allows you to build a larger nest egg but also minimizes the financial burden of catching up later in life. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Putting off saving for retirement can have a significant impact on the total you’ll have when you reach retirement age. The biggest reason is compound interest—the powerful process where your investments grow, and those returns, in turn, earn even more returns. The more time your money has to grow, the greater the benefit of compounding.
Example: Two individuals, Alex and Taylor are both self-employed individuals. Their shared goal is 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 puts away $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex contributes $180,000 and accumulates $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily may result in substantial growth. Consider this example showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example are based on estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. These examples are for illustrative purposes only and are not a promise of future results. Outcomes may change depending on elements like market conditions, fees, and individual circumstances. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Paterson, NJ, it is often the case that you focus more on reinvesting in your business over saving for retirement. However, initiating a plan now allows you to:
- Take advantage of growth that is tax-deferred or penalty-free withdrawals later on.
- Benefit from adjustable savings that adapt to your cash flow.
- Establish a financial cushion that ensures stability, no matter how your business changes.
Starting early, the less you’ll be required to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and allowing yourself the freedom to concentrate on your objectives—both for your future retirement and your Paterson, NJ business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for those working for themselves in Paterson, NJ, each offering its own advantages and considerations. A financial advisor is available to help you understand the advantages and disadvantages of each choice and identify the one most suitable for your circumstances. Generally speaking, your self-employed retirement plan options in Paterson, NJ consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that include distinct tax benefits. In a standard IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but money taken out during retirement are subject to income tax. In contrast, Roth IRA contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals are penalty-free provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are accessible for individuals with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that allows self-employed individuals to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) already contributed. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan is a good option for businesses that experience periods of inconsistent earnings. Unlike other plans, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs function like conventional IRAs, where you contribute pre-tax dollars and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also called an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan designed for businesses with no employees or if the only employee is your spouse. These plans are similar to employer-sponsored 401(k) plans, and enable contributions as both the employer and the employee with pre-tax money. This allows for more savings compared to SEPs or IRAs; however, the additional opportunities may be offset by 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: Solo 401(k)s are available solely to 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 have the ability to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, 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 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 25% of your net self-employment income, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $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: A defined benefit plan is a retirement option that delivers a fixed, predetermined benefit to business owners upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but enables participants to determine what they'll have in retirement. This strategy is recommended for high-earning entrepreneurs who want to save a substantial amount for retirement and can commit to making substantial contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income during retirement.
Eligibility: Entrepreneurs 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 people above age 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans include:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% with plans to contribute more
- Organizations that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The contribution limit requires calculation from an actuary using your financial situation, age, and savings targets. Limits on contributions are adjusted each year.
The Importance of a Financial Advisor in Paterson, NJ for Your Self-Employed Retirement Plan
Working with a financial advisor in Paterson, NJ specialized in self-employed retirement plans can be an invaluable resource for those working for themselves. They offer the knowledge to assist guide you through the challenges of retirement planning and craft a personalized approach that matches your objectives. A financial advisor in Paterson, NJ will evaluate your financial situation, determine how much risk you’re comfortable with, and help you in choosing wisely about saving and investing for retirement. Part of what we do for you involves:
- Assist in selecting a plan that suits your unique requirements
- Tailor the plan to fit you personally even further
- Formalize a plan in writing as required by IRS rules
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan when necessary
- Provide ongoing education and advice throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Paterson, NJ: Correct Capital's Process
Paterson, NJ business owners who aren’t equipped with the time or understanding to oversee their self-employed retirement plan on their own can become overwhelmed when faced with their options. Through our team at Correct Capital, our Paterson, NJ financial advisors take on the majority of your retirement strategy for you, and strive to ensure meeting your retirement goals as straightforward 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: A quick 20-minute call is all it takes, a member of our advisor team will assess if we're a good fit for you and your business. This brief introduction lets us get a sense of your goals with zero commitment or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including how many employees you have (if any), your existing financial picture, and your long-term savings targets. This allows us to put together a custom plan designed just for you.
- Review Your Plan: When we finalize a plan based on the information you provide, we'll schedule a meeting and discuss your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can begin contributing. As time goes on, we'll meet with you and track your progress to keep it tailored to your evolving circumstances.
Our Paterson, NJ financial advisors and retirement plan consultants are fiduciary advisors, meaning they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Paterson, NJ 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 Paterson, NJ
You don't see your business as "just a business", and your Paterson, NJ financial advisors need to offer more than simply sound financial advice. 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 Paterson, NJ benefit from our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
