Self-employed retirement plans Rockford, IL. The flexibility of running your own company in Rockford, IL is one of the best aspects of working for yourself. That said, this freedom often comes with certain challenges, particularly in terms of planning for retirement, because you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many should consider understanding their retirement options. In addition to achieving a financially stable retirement, seeking advice from a financial advisor in Rockford, IL to set up your self-employed retirement plan can provide significant tax advantages that enable both you and your business to thrive.
Few Rockford, IL financial advisory and retirement planning firms truly grasp the challenges faced by small business owners as well as Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and we are deeply experienced in assisting business owners in their retirement planning needs. We know that your business and retirement aspirations extend well past basic numbers, and we work tirelessly to provide tailored solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Rockford, IL, or call Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Rockford, IL today.
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Why Rockford, IL Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver real benefits today. From flexible contributions to substantial tax savings, partnering with a financial advisor in Rockford, IL helps you customize your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the freedom to tailor how much you save:
- Customizable Contributions: Set aside more during profitable years and scale back when revenues are down, ensuring your plan fits your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, allowing you to withdraw your savings tax-free down the road—a wise move if you believe your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, so you can keep more of your income.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, giving your money more time to compound.
- State-Specific Incentives: In some states, you may be eligible for state-specific credits as a sole proprietor. These local incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across different asset classes like stocks and bonds is a smart way to reduce risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a financial buffer for your business prevents you from dipping into savings during tough times and incurring penalties.
Plan for the Future of Your Rockford, IL Business
Preparing for retirement can assist you plan ahead for what’s next with your Rockford, IL business:
- Selling Your Business: If you’re planning to sell, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and won’t be included in the sale. These accounts ensure the reliable income you’ll need later on. Remember that while selling a business often leads to a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., as much as $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, depending on plan details).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you’ll owe when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts ensure a stable foundation during the change. You can also seek advice from a financial advisor experienced in both succession and retirement strategies to reduce taxes associated with the transaction.
With the right retirement plan, you gain control over your financial future, cut down your tax obligations, and build a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Rockford, IL Now?
There’s no denying that time is one of the most crucial resources in retirement planning. Beginning sooner rather than later not only allows you to build a more substantial retirement fund but also reduces the financial burden of saving aggressively in the future. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund may cause a substantial impact on the total you’ll have when you stop working. The primary reason is compound interest—the powerful process where your investments earn returns, and those returns, then, generate even more returns. The greater time span your money has to grow, the greater the benefit of this growth.
Example: Two individuals, Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor waits until age 40 but contributes $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time often create substantial growth. Consider this example showing the impact of compounding:
- Starting at age 25: If you invest $200 per month in a retirement plan with an projected return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month would result in only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
Saving early, the less effort required each year to meet your retirement goals.
*The figures provided in this example are estimates derived from NerdWallet’s Compound Interest Calculator, based on a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are intended as illustrative examples and are not a promise of future results. Outcomes may change based on factors such as market conditions, fees, and personal factors. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
If you’re self-employed in Rockford, IL, it is often the case that you focus more on reinvesting in your business over saving for retirement. Even so, initiating a plan now allows you to:
- Benefit from tax-free future growth or tax-free withdrawals later on.
- Benefit from flexible contributions that change with your cash flow.
- Establish a financial cushion that ensures stability, no matter how your business develops.
The sooner you start, the less you’ll have to worry about playing catch-up later in life. Building your retirement savings today means gaining control over your financial future and giving yourself the ability to turn your attention to your goals—both for your golden years and your Rockford, IL business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for entrepreneurs in Rockford, IL, each with its own benefits and trade-offs. A financial advisor can help you evaluate the benefits and drawbacks of each plan and choose the one best suited for your unique situation. Generally speaking, your self-employed retirement plan options in Rockford, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that include specific tax advantages. In a conventional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxed as income. In contrast, Roth IRAs require contributions using income already taxed, but eligible distributions during retirement, including earnings, are exempt from taxes. In both accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are available to anyone with a source of 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 serves as a retirement savings option that allows those who are self-employed to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) would not be able to contribute beyond the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. You may choose to contribute a set monetary value or a percentage of wages to employee accounts. This type of plan works well for businesses that experience cycles of high revenue and low revenue. Compared to other retirement options, SEP IRAs are free of costly startup or administrative fees.
SEPs function like conventional IRAs, where the contributions are tax-deferred and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the contribution you can make 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 savings option for the self-employed meant for businesses without employees or if the only employee is your spouse. This type of plan function similarly to employer-sponsored 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This provides more savings than SEPs or IRAs; however, the increased savings potential often come with more limited investment options. 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 can make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employment income, up to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your net self-employment income, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (as of 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that delivers a fixed, predetermined benefit to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, investment returns don’t affect the payout, but enables participants to determine what they'll have in retirement. This plan is recommended for higher-income professionals who want to save a substantial amount for retirement and are willing to make sizeable contributions. Contributions are tax deferred, and withdrawals are taxable as income during retirement.
Eligibility: Any self-employed individual running an owner-only business or employing fewer than five people can open an individual defined benefit plan, but it's most commonly recommended for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans include:
- Partners or owners who desire to contribute more than $70,000 (or $77,500 for individuals 50 and older)
- Organizations that already put in 3-4% and are willing to do more
- Companies with proven consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The cap on contributions must be determined by an actuary determined by your income, age, and retirement goals. Allowable contributions change annually.
The Importance of a Financial Advisor in Rockford, IL for Your Self-Employed Retirement Plan
A financial advisor in Rockford, IL focused on self-employed retirement strategies serves as an important asset for entrepreneurs. They have the expertise to help navigate the complexities of retirement planning and craft a personalized approach that reflects your aspirations. An expert in your area will evaluate your financial situation, identify your risk preferences, and help you in choosing wisely about saving and investing for retirement. Included in what we do for you includes:
- Assist in selecting a plan that best fits your needs and goals
- Tailor the plan to fit you personally even further
- Create a written plan that complies with IRS regulations
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Review and modify your plan as needed
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Rockford, IL: Correct Capital's Process
Entrepreneurs in Rockford, IL who aren’t equipped with the time or understanding to manage their retirement savings strategy independently often feel overwhelmed when faced with their available plans. With Correct Capital, our Rockford, IL financial advisors manage the lion's share of your retirement planning for you, working to make meeting your future savings targets as straightforward as possible for you. We can help you get set up your self-employed retirement plan in a quick, four-step process:
- 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 brief introduction helps us get a sense of your goals with no pressure or extensive time commitment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including your employee count, your present financial standing, and your retirement goals. This allows us to put together a tailored approach designed just for you.
- Review Your Plan: When we finalize a plan from the information you provide, we'll schedule a meeting and discuss your plan thoroughly to ensure you understand it and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. Throughout our relationship, we'll check in and track your progress to keep it tailored to your evolving circumstances.
Our Rockford, IL financial advisors and retirement plan consultants act as fiduciary advisors, who are obligated to they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Rockford, IL 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 Rockford, IL
To you, your business is more than "just a business", and your Rockford, IL financial advisors must deliver more than simply sound financial advice. At Correct Capital, we make it a priority to understand our clients and their businesses to provide tailored self-employed retirement plans. We offer all our Rockford, IL 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, reach out to Correct Capital at 877-930-401k or contact us online.
