Self-employed retirement plans in Richmond Heights, MO. The flexibility involved with having your own business in Richmond Heights, MO is a fantastic aspect of being self-employed. But that freedom can come with limited stability, particularly in terms of saving for retirement, as you don't have access to any employer plans. Barely more than 10% of self-employed people have retirement plans they can contribute to, but many would be wise to explore their options. In addition to a more comfortable retirement, partnering with a financial advisor to set up your self-employed retirement plan in Richmond Heights, MO offers significant tax advantages that can help free up much-needed funds for your business.
Not many wealth management and retirement planning firms know what it's like to be self-employed or a small business owner more than Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can read more about our story on our website). We know that your business and retirement goals transcend mere monetary figures, and we are devoted to offering customized plans that fit your goals. Continue reading to learn more about your self-employed retirement plan options in Richmond Heights, MO, or call Correct Capital at 314-930-401(k) or contact us online to speak to a member of our advisory team today.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings options available for self-employed individuals, and which is best for you depends on your unique situation. A Richmond Heights, MO financial advisor can help you understand the benefits and drawbacks of each option and select the most suitable one for your circumstances. Generally, your self-employed retirement plan options in Richmond Heights, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that offer specific tax advantages. If you deposit to a traditional IRA, deposits are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are subject to income tax. In contrast, Roth IRA contributions are made with after-tax income, but you pay no taxes on withdrawals or earnings. In both a traditional an a Roth IRA, withdrawals can be made without extra fees if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through an employer, traditional and Roth IRAs are available to anyone with an earned income.
Contribution Limits: For 2023, the maximum yearly contributions for IRAs are $6,500, or $7,500 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that allows self-employed individuals to contribute a share of of their annual income from self-employment. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 25%. If you have employees, you must contribute an equal amount to their pensions. You may choose to contribute either a predetermined fixed dollar amount or a proportion of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that experience cycles of high revenue and low revenue. SEP IRAs don't have the high upfront costs or administrative expenses other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and distributions are taxed at your income at the time of distribution.
Eligibility: Self-employed individuals and any employer, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the maximum amount you can contribute in a given year is decided by a unique calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan for sole proprietors or those who only employ a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers greater potential for savings than some other retirement savings plans, however the possibility of greater retirement savings is often offset by having less investment options available. In an individual 401(k) plan, you can make either traditional or Roth deferrals, which each feature the same tax advantages as their IRA contribution counterparts.
Eligibility: Only self-employed individuals and their spouses can establish 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:
- Elective deferrals (as an employee) of a maximum of 100% of your earned income from self-employment, up to the annual contribution limit. In 2023, those limits are $22,500, or $30,000 if you are 50 or older.
- Employer profit-sharing contributions (as an employer) which cannot exceed a maximum of 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.
The total contribution cannot exceed $66,000, or $73,500 if you're over age 50 (in 2023).
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement plan that provides a a fixed benefit to self-employed individuals once they've retired. In contrast to other types of retirement plans, a defined benefit plan doesn't oscillate because of investment gains, but allows self-employed people to know exactly how much they'll get in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a substantial portion for retirement and want to make significant contributions. Contributions are tax deferred and contributions are taxed as income in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can establish an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who desire to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to do more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is calculated by an actuary who calculates for your income, age, and retirement goals. Contribution limits are adjusted annually.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Richmond Heights, MO
A financial advisor in Richmond Heights, MO specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the know-how to help you understand the complexities of retirement planning and design a personalized approach that gets you where you want to go. A financial advisor will analyze where your finances currently are, adjust for your risk tolerance, and guide you in making informed decisions for yourself, both as employer and future retiree. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Adopt a written plan that follows all IRS rules
- Arrange a trust plan for assets
- Implement a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance into and through retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Richmond Heights, MO: Correct Capital's Process
Richmond Heights, MO business owners who don't have the time, inclination, or knowledge to handle their self-employed retirement plan themselves can become overwhelmed when looking at their options. At Correct Capital, our financial advisors handle the bulk of the retirement planning work on your behalf, and strive to make achieving your retirement goals as simple as we possibly can. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need 20 minutes for a member of our advisor team to know if we're suitable for you and your business. This brief introduction lets us get a feel for what you're looking for with no major time investment for you.
- Gather Information — If we seem like a good fit, we'll ask for more info, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to live. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over your plan in detail to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've started to move forward, we'll put everything in place so your savings can start growing immediately. As long as we work together, we'll keep you up-to-date with how things are going and adjust your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and ethically obligated to do what's in your best interest. We are proud to provide straightforward communication and excellent service to help you achieve your self-employed retirement goals.
Other services we offer in Richmond Heights, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
Call Correct Capital for Your Richmond Heights, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Richmond Heights, MO financial advisors need to provide you with more than merely wise financial advice. Correct Capital enjoys getting to know our clients and their business to deliver customized self-employed retirement plans. We offer all our Richmond Heights, MO clients the same I.O.U. promise: all of the advice we give you will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Richmond Heights, MO, speak to a financial advisor today at 314-930-401(k) or contact us through our website.
