Self-employed retirement plans Phoenix, AZ. The freedom of running your own company in Phoenix, AZ offers many benefits of having a self-directed career. That said, this freedom can come with a lack of security, particularly when it comes to building your retirement fund, since you don't have the option of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from exploring their options. In addition to achieving a financially stable retirement, seeking advice from a financial advisor in Phoenix, AZ to establish your self-employed retirement plan delivers significant tax advantages that help your business to grow and succeed.
Few Phoenix, AZ 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 Correct Capital are deeply experienced in assisting business owners in their retirement planning needs. We know that your business and retirement aspirations go far beyond simple financial figures, and we work tirelessly to offer personalized solutions that reflect your objectives. Keep reading to learn more about your self-employed retirement plan options in Phoenix, AZ, or call Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Phoenix, AZ today.
Why Phoenix, AZ Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also offer real benefits today. From flexible contributions to considerable tax savings, consulting a financial advisor in Phoenix, AZ enables you to create your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
When your earnings vary over time, a plan like a SEP IRA or Solo 401(k) provides the freedom to tailor how much you save:
- Customizable Contributions: Save extra during successful years and scale back when revenues are down, so that your plan works with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw your savings tax-free down the road—a smart decision if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to compound.
- State-Specific Incentives: In some states, you may be eligible for state-specific deductions as a self-employed individual. These regional incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can apply for a credit of up to 50% of the first $2,000 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across a mix of stocks, bonds, and alternatives is a smart way to minimize exposure to risk while continuing to build your savings.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business helps you avoid dipping into savings during challenging periods and facing tax penalties.
Plan for the Future of Your Phoenix, AZ Business
Retirement planning can assist you prepare for what’s next with your Phoenix, AZ business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s remain yours and won’t be included in the sale. These plans can provide the steady income you’ll need later on. It’s important to note that while the sale of a business usually creates a capital gain, deposits into these plans are subject to yearly maximums (e.g., as much as $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings helps lower the taxes you’ll owe when you sell your business.
- Succession Planning: For those winding down or handing over their business, your retirement savings provide a stable foundation through the transition. You might want to partner with a financial advisor experienced in both succession and retirement strategies to minimize tax burdens on the sale.
With the best-fit retirement strategy, you manage your financial future, cut down your tax obligations, and build a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Phoenix, AZ Now?
There’s no denying that time is one of the most crucial factors for building your retirement fund. Beginning sooner rather than later not only lets you accumulate a larger nest egg but also lowers the financial burden of playing catch-up as you get older. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings can have a major impact on the total you’ll have when you stop working. The main reason is compound interest—the concept where your investments generate earnings, and those returns, in turn, generate even more returns. The longer your money has to grow, the more significant the effect 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 starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but saves $7,500 annually to bridge the gap.
By age 65, using a projected 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently can lead to substantial growth. Consider this example showing the power of compound interest:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month yields only $235,412.97* by age 65—a shortfall of over $260,000, simply due to a 10-year delay.
Starting sooner, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example 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 depending on factors such as market conditions, fees, and personal factors. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
If you’re self-employed in Phoenix, AZ, it is often the case that you prioritize reinvesting in your business instead of saving for retirement. However, initiating a plan now allows you to:
- Benefit from growth that is tax-deferred or penalty-free withdrawals down the road.
- Benefit from adjustable savings that align with your cash flow.
- Create a safety net that provides security, no matter how your business develops.
The sooner you start, the less you’ll need to worry about playing catch-up later in life. Saving for retirement now means gaining control over your financial future and giving yourself the freedom to concentrate on your dreams—both for your future retirement and your Phoenix, AZ business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options open for entrepreneurs in Phoenix, AZ, each offering its own benefits and trade-offs. A financial advisor can help you understand the pros and cons of each plan and determine the one ideal for your circumstances. In most cases, your self-employed retirement plan options in Phoenix, AZ include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that provide specific tax advantages. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but withdrawals in retirement are subject to income tax. In contrast, with Roth IRAs, you contribute using income already taxed, but retirement withdrawals that qualify, including earnings, are tax-free. In both types of accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike plans linked to your job, IRAs, including traditional and Roth options are open to those with a source of 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: The Simplified Employee Pension IRA offers a way to save for retirement that allows 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 more than 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. It's your choice whether to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA may be ideal for companies with fluctuating revenue streams. Unlike other plans, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs function like standard IRAs, where the contributions are tax-deferred and money withdrawn is subject to income tax.
Eligibility: Any employer, including the self-employed can open 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
As a self-employed person, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for businesses with no employees or if the only employee is your spouse. This type of plan are similar to traditional employer-managed 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This allows for more savings compared to SEPs or IRAs; however, the extra savings options may be offset by more constrained investment avenues. Using a solo 401(k), 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 may establish and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you're over 50, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) are limited to 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.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that delivers a pre-established payout to business owners upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but enables participants to determine the precise amount they'll get in retirement. This plan is ideal for higher-income self-employed individuals who want to save a large amount for retirement and are willing to make larger deposits. Contributions are tax deferred, and withdrawals are taxable as income in retirement.
Eligibility: Any self-employed individual managing a one-person company or with less than five employees may establish an individual defined benefit plan, but it's typically advised for individuals aged 50+ who make $250,000 or more annually. Typically, good candidates for defined benefit plans are:
- Business owners or partners who want to invest more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% with plans to contribute more
- Companies that have demonstrated consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The contribution limit requires calculation from an actuary determined by your income, age, and retirement goals. Allowable contributions change annually.
The Importance of a Financial Advisor in Phoenix, AZ for Your Self-Employed Retirement Plan
Partnering with an advisor in Phoenix, AZ experienced with retirement plans for the self-employed is an important asset for self-employed individuals. They have the expertise to help understand the intricacies of saving for retirement and design a customized plan that aligns with your goals. A financial advisor in Phoenix, AZ will evaluate your financial situation, determine how much risk you’re comfortable with, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you features:
- Guide you in choosing a plan that suits your unique requirements
- Customize the plan to your specific situation even further
- Adopt a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Provide ongoing education and advice throughout your retirement planning process
- Maximize what you receive in retirement by making the most of your social security
Self-Employed Retirement Plans in Phoenix, AZ: Correct Capital's Process
Self-employed individuals in Phoenix, AZ who lack the time, interest, or knowledge to oversee their own retirement planning on their own can become overwhelmed when faced with their choices. With Correct Capital, our Phoenix, AZ financial advisors handle the lion's share of your retirement strategy for you, and strive to ensure meeting your future savings targets as easy as possible for you. We can help you get set 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 can determine if we're a good fit for you and your business. This brief introduction helps us learn about your needs with zero commitment or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll gather information, including whether you have employees, your present financial standing, and your retirement goals. 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 sit down with you and review your plan in detail to make sure it's clear and understand how it best correlates to your needs.
- Implementation and Monitoring: When we finalize on your plan, we'll put everything in place so you can initiate your savings journey. Over the course of our partnership, we'll meet with you and review your strategy to make sure it remains aligned with your goals.
Our Phoenix, AZ 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 Phoenix, AZ include:
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
Call Correct Capital for Your Self-Employed Retirement Plan in Phoenix, AZ
To you, your business is more than "just a business", and your Phoenix, AZ financial advisors need to offer more than just good financial guidance. With Correct Capital, we take the time to get to know our clients and their businesses to create customized self-employed retirement plans. We offer all our Phoenix, AZ clients our I.O.U. promise: all of the advice you get from us 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.
