Self-employed retirement plans in Rock Hill, MO. The freedom of having your own business in Rock Hill, MO is one of the great things about being self-employed. But more leeway can come with limited stability, particularly in when it comes to building a retirement plan, as you don't have access to any employer plans. Only a fraction of self-employed individuals have retirement plans they save with, but many would be wise to explore their options. In addition to a more comfortable retirement, working with a financial advisor to set up your self-employed retirement plan in Rock Hill, MO offers significant tax advantages that can help you improve your bottom line.
Only a handful of financial advisory 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 learn more about our story here). We have a deep understanding that your business and retirement aspirations go beyond mere monetary figures, and we are committed to offering personalized solutions that fit your goals. Read on to learn more about your self-employed retirement plan options in Rock Hill, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team now.
What Self-Employed Retirement Plans Are There?
There are several retirement savings plans available for self-employed individuals, each with its own set of benefits and considerations. A Rock Hill, MO financial advisor can help you grasp the advantages and disadvantages of each option and choose that works best for you. Generally, your self-employed retirement plan options in Rock Hill, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that provides individuals with tax advantages to save for retirement. If you deposit to a traditional IRA, contributions are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are liable to income tax. On the other hand, Roth IRA deposits are made with money you've already paid taxes on, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals can be made without penalty as long as 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, annual contribution limits 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 portion of of the money they make from their self-employment. Since you are self-employed, you (the employee) have a contribution limit of no more than the 25% already contributed by you (the employer). If you have employees, you would have to contribute the same amount for them as you do for yourself. You can either contribute either a fixed dollar sum or a percentage of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan for businesses that go through periods of variable income. SEP IRAs don't have the costly startup or administrative fees often associated with other retirement plans.
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: Any employer, including the self-employed, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For self-employed people, the maximum amount you can contribute in a given year is based on a special 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 both an employer or employee with pre-tax money. This offers increased savings opportunities than SEPs or IRAs, however the possibility of greater retirement savings is often offset by more limited investment options. In a one-participant 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only business owners 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 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 up 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.
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 offers a a fixed benefit to self-employed individuals once they've retired. As opposed to the defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed people to know exactly what they'll receive in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a large amount for retirement and want to add substantial contributions. Contributions are tax deferred and withdrawals are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can open an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and 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 willing to contribute more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they didn't save as much
Contribution Limits: The contribution limit must be determined by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted each year.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Rock Hill, MO
A financial advisor in Rock Hill, 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 implement a personalized approach that gets you where you want to go. A financial planner will look at where your finances currently are, understand your risk tolerance, and help you make smart 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 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 as you continue on the road to retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Rock Hill, MO: Correct Capital's Process
Rock Hill, MO business owners without the time, desire, 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 lion's share of your retirement planning for you, and strive to make meeting your retirement goals as easy 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 a short 20-minute call for one of our advisors to know if we're a good fit for you and your business. This short introduction lets us understand your needs with no major time investment for you.
- Gather Information — If we seem like a good fit, we'll ask for information, including how many employees you have (if any), your current finances, and what kind of retirement you want to live. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over the details of your plan to ensure it's what you were looking for.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so your savings can start growing immediately. Throughout our relationship, we'll keep you up-to-date with how things are going and monitor your plan to ensure it stays suited to your needs.
Our financial advisors and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's in your best interest. We pride ourselves in providing transparent communication and high-quality service to assist you attain your self-employed retirement goals.
Other services we offer in Rock Hill, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
Call Correct Capital for Your Rock Hill, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Rock Hill, MO financial advisors need to provide you with more than just sound financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver personalized self-employed retirement plans. We offer all our Rock Hill, 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 Rock Hill, MO, speak to a member of our team today at 877-930-4015 or fill out our online form.
