Self-employed retirement plans Philadelphia, PA. The flexibility of being your own boss in Philadelphia, PA offers many benefits of working for yourself. However, this flexibility can come with certain challenges, notably when it comes to retirement savings, because you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many could benefit from understanding their retirement options. In addition to enjoying a more secure retirement, working with a financial advisor in Philadelphia, PA to establish your self-employed retirement plan delivers significant tax advantages that help your business to grow and succeed.
Few Philadelphia, PA financial advisory and retirement planning firms are as attuned to the requirements of small business owners better than Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and Correct Capital have a rich history of supporting entrepreneurs with their retirement planning needs. We know that your goals for your business and retirement extend well past basic numbers, and we are dedicated to create personalized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Philadelphia, PA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Philadelphia, PA today.
Why Philadelphia, PA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver immediate benefits today. With customizable contribution options to significant tax savings, working with a financial advisor in Philadelphia, PA helps you customize your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) offers the option to adjust how much you save:
- Customizable Contributions: Set aside more during successful years and reduce savings when your earnings dip, ensuring your plan aligns with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw your savings tax-free down the road—a wise move if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Self-employed retirement plans offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA shrink your tax liability, allowing you to 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: In some states, you could qualify for additional deductions as a business owner. These state-level incentives help make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 put into 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 about how you invest:
- Diversified Portfolios: Spreading your investments across varied stocks, bonds, and other assets serves to minimize exposure to risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t tapping into your nest egg during challenging periods and incurring penalties.
Plan for the Future of Your Philadelphia, PA Business
Preparing for retirement enables you to prepare for what’s next with your Philadelphia, PA business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These accounts offer the reliable income you’ll need later on. Remember that while selling a business often leads to a capital gain, deposits into these plans are restricted by contribution limits (e.g., up to $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, factoring in catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you are required to pay when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your nest egg provide the funds you need as you make this shift. You might want to seek advice from a financial advisor who specializes in succession planning and retirement accounts to reduce taxes on the sale.
With the best-fit retirement strategy, you manage your financial future, lower your tax bill, and create a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Philadelphia, PA Now?
There’s no denying that time is one of the most crucial factors when it comes to saving for retirement. Getting a head start not only allows you to build a larger nest egg but also reduces the stress of playing catch-up as you get older. The following are reasons why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement could lead to a substantial impact on the amount you’ll have when you stop working. The biggest reason is compound interest—the concept where your investments grow, and those returns, subsequently, earn even more returns. The more time your money has to grow, the larger the benefit of this compounding process.
Example: Two individuals, Alex and Taylor are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex begins contributing $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 ends up with $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time can lead to significant growth. Take a look at this scenario showing the impact of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, all because of a 10-year delay.
Starting sooner, the less you need to save each year to meet your retirement goals.
*The numbers shown in this scenario 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. The scenarios provided are intended as illustrative examples and cannot predict actual future outcomes. Your individual results may differ depending on factors such as 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
If you’re self-employed in Philadelphia, PA, it is often the case that you put more emphasis on reinvesting in your business instead of saving for retirement. However, initiating a plan now allows you to:
- Take advantage of tax-free future growth or penalty-free withdrawals down the road.
- Take advantage of contribution flexibility that change with your cash flow.
- Build a financial cushion that offers peace of mind, no matter how your business evolves.
Starting early, the less you’ll need to worry about catching up later in life. Taking steps toward your retirement goals today means managing your financial future and creating for yourself the ability to concentrate on your goals—both for your retirement years and your Philadelphia, PA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for those working for themselves in Philadelphia, PA, each offering its own benefits and trade-offs. A financial advisor will guide you to learn about the benefits and drawbacks of each choice and choose the one most suitable for your circumstances. Typically, your self-employed retirement plan options in Philadelphia, PA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that include specific tax advantages. In a conventional IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but withdrawals in retirement are taxable. In contrast, with Roth IRAs, you contribute are made with after-tax income, but qualified withdrawals in retirement, including earnings, are tax-free. In both types of accounts, 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, IRAs, including traditional and Roth options are accessible for individuals with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that enables those who are self-employed to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions above the 25% you (the employer) have designated. If you have employees, it's required to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA may be ideal for companies with periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs work like standard IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 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, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan designed for businesses without employees or where the only employee is a spouse. This type of plan function similarly to traditional employer-managed 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the additional opportunities often come with more constrained investment avenues. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses are eligible to open 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:
- Employee contributions of up to 100% of your self-employed earnings, capped at 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 net earnings from self-employment, 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 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that guarantees a set amount to business owners upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but enables participants to determine the precise amount they'll receive in retirement. This option is recommended for high-earning entrepreneurs who aim to accumulate a substantial amount for retirement and can commit to making larger deposits. Contributions are tax deferred, and withdrawals are taxable as income in retirement.
Eligibility: Any self-employed individual operating a solo business or with less than five employees can open an individual defined benefit plan, but it's most commonly recommended for people above age 50 who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans tend to be:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 for individuals 50 and older)
- Companies already contributing 3-4% but are open to increasing contributions
- Businesses with proven consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The contribution limit is calculated by an actuary based on your financial situation, age, and savings targets. Contribution limits change annually.
The Importance of a Financial Advisor in Philadelphia, PA for Your Self-Employed Retirement Plan
A financial advisor in Philadelphia, PA experienced with retirement plans for the self-employed is an important asset for entrepreneurs. They have the expertise to help guide you through the challenges of retirement planning and craft a tailored strategy that reflects your aspirations. Your advisor in Philadelphia, PA will evaluate your financial situation, determine how much risk you’re comfortable with, and assist you in choosing wisely about saving and investing for retirement. Included in what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Customize the plan to your needs even further
- Adopt a written plan that complies with IRS regulations
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Deliver continuous support and financial insights throughout your retirement planning process
- Maximize what you receive in retirement by maximizing your social security benefits
Self-Employed Retirement Plans in Philadelphia, PA: Correct Capital's Process
Self-employed individuals in Philadelphia, PA who aren’t equipped with the time or understanding to manage their self-employed retirement plan themselves can become overwhelmed by their choices. At Correct Capital, our Philadelphia, PA financial advisors handle the lion's share of your retirement strategy for you, working to make meeting your retirement goals as hassle-free as possible for you. We are here to assist you in setting up your self-employed retirement plan in four simple steps:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can determine if we're suited to your needs for you and your business. This initial call lets us learn about your needs with no pressure or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll gather information, including whether you have employees, your current financial situation, and your future objectives. This helps us create a personalized strategy designed just for you.
- Review Your Plan: After we put together a plan using the information you provide, we'll sit down with you and go over your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. As time goes on, we'll meet with you and review your strategy to keep it tailored to your evolving circumstances.
Our Philadelphia, PA financial advisors and retirement plan consultants are fiduciary advisors, meaning they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Philadelphia, PA include:
- Family Wealth Planning
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
Call Correct Capital for Your Self-Employed Retirement Plan in Philadelphia, PA
You don't see your business as "just a business", and your Philadelphia, PA financial advisors need to offer more than simply sound financial advice. With Correct Capital, we make it a priority to understand our clients and their businesses to create customized self-employed retirement plans. We offer all our Philadelphia, PA clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To get started on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
