Self-employed retirement plans in Richmond Heights, MO. The freedom of running your own business in Richmond Heights, MO is one of the great things about being self-employed. But that freedom can come with limited stability, especially in in regards to building a retirement plan, you don't have an employer who will set up a plan for you. Only a fraction of self-employed individuals have a workplace retirement plan, but many would be better off exploring 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 tax benefits that can help free up much-needed funds for your business.
Not many wealth management and retirement planning firms will understand the needs of the self-employed and small business owners more than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can learn more about our story here). We have a deep understanding that your business and retirement goals transcend spreadsheets and percentages, and we are dedicated to offering customized plans that reflect where you are and where you want to go. Continue reading to learn more about your self-employed retirement plan options in Richmond Heights, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a small business financial advisor today.
Types of Self-Employed Retirement Plans
There are several retirement savings options that the self-employed can set up, and which is best for you depends on your unique situation. A Richmond Heights, MO financial advisor can help you understand the advantages and disadvantages of each option and select that works best for you. Typically, your self-employed retirement plan options in Richmond Heights, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are investment accounts that offer specific tax advantages. If you deposit to a traditional IRA, deposits are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are subject to income tax. On the other hand, Roth IRA payments are made with after-tax income, but qualified distributions in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through employment, 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 the money they make from their self-employment. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, they must receive the same amount you do. You can either contribute either a predetermined fixed dollar amount or a proportion of annual income to employee accounts. SEP IRAs may be a suitable self-employed retirement plan if your business goes through cycles of high revenue and low revenue. SEP IRAs don't have the costly startup or administrative fees other retirement plans do.
SEPs work like traditional IRAs, where deposits are made with pre-tax money and distributions are taxed at your income at the time of withdrawal.
Eligibility: Any employer, including the self-employed, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the amount eligible to be contributed is based on a specific formula.
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 similarly to employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers increased savings opportunities than SEPs or IRAs, however the additional opportunities for saving are often offset by having less investment options available. In a solo 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only self-employed individuals and their spouses have access to solo 401(k)s.
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 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) of 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.
On an annual basis, contributions 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 predetermined benefit to self-employed individuals once they've retired. As opposed to 401(k)s or IRAs, a defined benefit plan doesn't go up and down based on investment gains, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a substantial portion for retirement and are willing to make substantial contributions. Contributions are tax deferred and contributions are taxed as income in retirement.
Eligibility: Any self-employed individual who runs a business where they're the only owner 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 at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who desire to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to do more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who want to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit is determined by an actuary based on 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 indispensable for self-employed individuals. They have the experience to help you navigate the complexities of retirement planning and develop a personalized approach that gets you where you want to go. A financial planner will assess your financial situation, help you figure out your risk tolerance, and guide you in making informed decisions for yourself, both as a business owner 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 regulations
- Arrange a trust plan for assets
- Create a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and support into and through retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Richmond Heights, MO: Correct Capital's Process
Richmond Heights, MO business owners without the time, inclination, or knowledge to handle their self-employed retirement plan themselves can become stressed when looking at their options. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work on your behalf, and attempt to make achieving your business and retirement aspirations as simple as possible for you. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — It only takes 20 minutes for one of our advisors to understand if we're the best firm to help you reach your goals. This short introduction allows us to understand what you're looking for with no major time investment on your part.
- Gather Information — If we seem like a good fit, we'll ask for more info, including how many employees you have (if any), your current financial situation, and what kind of retirement you want to have. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and go over the details of your plan to ensure you understand it.
- Implementation and Monitoring — Once we've started to move forward, we'll put everything in place so you can start saving. Throughout your time working with us, 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 morally bound to do what's in your best interest. We pride ourselves in providing straightforward communication and top-notch service to assist you reach your self-employed retirement goals.
Other services we offer in Richmond Heights, MO include:
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 sage financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver customized self-employed retirement plans. We give all our Richmond Heights, MO clients the same I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Richmond Heights, MO, speak to a member of our team today at 877-930-4015 or contact us online.
