Self-employed retirement plans Providence, RI. The independence of owning your own business in Providence, RI is one of the greatest advantages of having a self-directed career. That said, this freedom often comes with potential drawbacks, particularly regarding retirement savings, as you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off looking into other possibilities. In addition to having a more secure retirement, working with a financial advisor in Providence, RI to establish your self-employed retirement plan can provide significant tax advantages that help your business to grow and succeed.
Few Providence, RI investment consulting and retirement planning firms are as attuned to the requirements of small business owners as well as Correct Capital. Our founder's father was a small business owner himself (learn more about our story here), and we have a rich history of helping businesses with their retirement planning needs. We know that your business and retirement aspirations go far beyond basic numbers, and we strive to create customized solutions to meet your unique goals. Keep reading to learn more about your self-employed retirement plan options in Providence, RI, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Providence, RI today.
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Why Providence, RI 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 real benefits today. From flexible contributions to significant tax savings, partnering with a financial advisor in Providence, RI helps you create your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) provides the freedom to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when your earnings dip, so your plan fits your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw without tax penalties in the future—a smart decision if you believe your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans deliver significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA lower your taxable income, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to accumulate.
- State-Specific Incentives: In some states, you might access state-specific deductions as a sole proprietor. These local incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, cutting down 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 determined by your investment strategy:
- Diversified Portfolios: Spreading your investments across different asset classes like stocks and bonds serves to reduce risk while helping to grow your savings.
- Emergency Back-Up: Combining your retirement strategy and a financial buffer for your business prevents you from using your retirement funds during tough times and incurring penalties.
Plan for the Future of Your Providence, RI Business
A thoughtful retirement strategy can assist you plan ahead for what’s next with your Providence, RI business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s stay in your name and don’t transfer with the business. These plans ensure the reliable income you’ll need later on. Keep in mind that while selling a business often leads to a capital gain, contributions to retirement accounts are subject to yearly maximums (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: Making the most of retirement savings helps lower the taxes you are required to pay when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts ensure a stable foundation through the transition. You can also work with a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens during the sale.
With the best-fit retirement strategy, you can take control of your financial future, cut down your tax obligations, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Providence, RI Now?
Time is one of the most crucial resources for building your retirement fund. Getting a head start not only allows you to build a more substantial retirement fund but also lowers the pressure of playing catch-up as you get older. This is why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings may cause a significant impact on the savings you’ll have when you reach retirement age. The main reason is compound interest—the financial principle where your investments generate earnings, and those returns, then, generate even more returns. The more time your money has to grow, the more significant the benefit of compounding.
Example: Two individuals, Alex and Taylor are both entrepreneurs. 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 saves $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex puts in $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time may result in impressive growth. Here’s a simple scenario showing the effect of consistent growth:
- Starting at age 25: If you invest $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 leaves you with 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 meet your retirement goals.
*The numbers shown in this scenario are estimates derived from NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. These examples are meant to provide general guidance and cannot predict actual future outcomes. Your individual results may differ based on factors such as market conditions, fees, and your unique situation. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
If you’re self-employed in Providence, RI, it might seem easier to focus more on reinvesting in your business instead of saving for retirement. Even so, beginning a plan now enables you to:
- Leverage growth that is tax-deferred or tax-free withdrawals down the road.
- Benefit from adjustable savings that change with your earnings.
- Build a safety net that provides security, no matter how your business changes.
The sooner you start, 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 taking control of your financial future and creating for yourself the ability to turn your attention to your dreams—both for your retirement years and your Providence, RI business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for those working for themselves in Providence, RI, each providing its own advantages and considerations. A financial advisor can help you learn about the benefits and drawbacks of each option and identify the one most suitable for your needs. In most cases, your self-employed retirement plan options in Providence, RI are:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that include key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but money taken out during retirement are subject to income tax. In contrast, Roth IRAs require contributions are made with after-tax income, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both types of accounts, withdrawals are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are open to those with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that allows those who are self-employed to contribute a percentage of their net earnings. Contributions must come from an employer, so, as a sole proprietor, you (the employee) cannot make additional contributions above 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 set monetary value or a percentage of wages to employee accounts. This type of plan works well for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs operate like traditional IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Both employers and 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
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 intended for companies that have no employees or if the only employee is your spouse. Solo 401(k)s are similar to standard 401(k) plans, and enable contributions as both an employer and an employee with pre-tax money. This offers more savings versus SEPs or IRAs; however, the additional opportunities may be offset by more restricted investment choices. 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: This plan is exclusively for 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, subject to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) are limited to 25% of your net earnings from self-employment, 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 if you're over age 50 (as of 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that guarantees a pre-established payout to business owners upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but enables participants to determine exactly how much they'll receive in retirement. This plan is recommended for high-earning self-employed individuals who aim to accumulate a substantial amount for retirement and can commit to making substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs operating a solo business or employing fewer than five people can open an individual defined benefit plan, but it's typically recommended for people above age 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans tend to be:
- Partners or owners who want to invest more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Companies with proven consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The cap on contributions is calculated by an actuary determined by your financial situation, age, and savings targets. Contribution limits change annually.
The Importance of a Financial Advisor in Providence, RI for Your Self-Employed Retirement Plan
Working with a financial advisor in Providence, RI experienced with retirement plans for the self-employed is an essential partner for entrepreneurs. They bring the skills needed to guide you through the challenges of retirement planning and develop a customized plan that reflects your aspirations. A financial advisor in Providence, RI will assess where you stand financially, 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:
- Assist in selecting a plan that best fits your needs and goals
- Further adapt the plan to fit you personally even further
- Create a written plan that complies with IRS regulations
- Set up an asset trust plan
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance throughout your retirement planning process
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Providence, RI: Correct Capital's Process
Entrepreneurs in Providence, RI who aren’t equipped with the time or understanding to manage their self-employed retirement plan on their own can become overwhelmed as they look at their options. At Correct Capital, our Providence, RI financial advisors handle the bulk of your retirement planning for you, working to make meeting your future savings targets as hassle-free as possible for you. We will guide you in creating your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team will assess if we're suited to your needs for you and your business. This initial call lets us get a sense of your goals with no obligation or major time investment on your part.
- Gather Information: Once we mutually decide to continue, we'll gather information, including whether you have employees, your present financial standing, and your future objectives. This helps us create a tailored approach suited specifically for your needs.
- Review Your Plan: After we put together a plan based on the information you provide, we'll sit down with you and discuss 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 set everything up so you can start saving. As time goes on, we'll have regular meetings and track your progress to ensure it stays suited to your needs.
Our Providence, RI financial advisors and retirement plan consultants are fiduciary advisors, which means they are committed by law and ethics to prioritize your needs above all else.
Other financial advisory services we offer in Providence, RI 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 Providence, RI
To you, your business is more than "just a business", and your Providence, RI financial advisors should provide more than simply sound financial advice. With Correct Capital, we take the time to get to know our clients and their businesses to create customized self-employed retirement plans. To every client in Providence, RI, we provide 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, contact Correct Capital now at 877-930-401k or contact us online.
