Self-employed retirement plans Sacramento, CA. The flexibility of owning your own business in Sacramento, CA offers many benefits of working for yourself. That said, this freedom often comes with a lack of security, notably in terms of building your retirement fund, because you don't have the benefit of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider looking into other possibilities. In addition to enjoying a more secure retirement, partnering with a financial advisor in Sacramento, CA to set up your self-employed retirement plan delivers significant tax advantages that allow you to move your business forward.
Few Sacramento, CA wealth management and retirement planning firms understand the needs of small business owners as well as Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and Correct Capital have a rich history of supporting entrepreneurs with their retirement planning needs. We understand that your business and retirement aspirations extend well past basic numbers, and we are dedicated to provide personalized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Sacramento, CA, or give us a call at Correct Capital at 877-930-401k or contact us online to consult with a small business financial advisor in Sacramento, CA today.
Why Sacramento, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver tangible benefits today. From flexible contributions to substantial tax savings, consulting a financial advisor in Sacramento, CA allows you to create your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) offers the option to adjust how much you save:
- Customizable Contributions: Contribute more during high-income years and scale back when your earnings dip, ensuring your plan aligns with your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you pay taxes on contributions now, 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
Self-employed retirement plans deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to accumulate.
- State-Specific Incentives: In some states, you might access extra deductions as a business owner. These state-level incentives can 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 they contribute a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement isn’t only about how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Spreading your investments across different stocks, bonds, and alternatives serves to reduce risk while helping to grow your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a financial buffer for your business ensures you don’t using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Sacramento, CA Business
Retirement planning enables you to think through what’s next with your Sacramento, CA business:
- Selling Your Business: For those considering a sale, plans like SEP IRAs or Solo 401(k)s remain your personal assets and won’t be included in the sale. These savings offer the financial stability you’ll need during retirement. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are capped at annual limits (e.g., a maximum of $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, factoring in catch-up contributions, based on plan compensation).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you might face when you pass on your business.
- Succession Planning: Whether you’re transferring ownership, your nest egg provide a stable foundation as you make this shift. You may also partner with a financial advisor with expertise in succession and retirement planning to reduce taxes during the sale.
With the right retirement plan, you can take control of your financial future, reduce your tax burden, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Sacramento, CA Now?
Time remains one of the most important assets for building your retirement fund. Beginning sooner rather than later not only allows you to build a larger nest egg but also reduces the pressure of playing catch-up as you get older. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Waiting to start your retirement fund could lead to a substantial impact on the savings you’ll have when you stop working. The primary reason is compound interest—the powerful process where your investments grow, and those returns, subsequently, accumulate even more returns. The longer your money has to grow, the larger the impact of this compounding process.
Example: Taylor and Alex 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 postpones starting contributions to age 40 but contributes $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time may result in significant growth. Take a look at this scenario showing the power of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
The earlier you begin, the less you need to save each year to reach your retirement goals.
*These calculations represent estimates derived from NerdWallet’s Compound Interest Calculator, with the assumption of 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. Actual results may vary depending on variables including market conditions, fees, and your unique situation. Always consult a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Sacramento, CA, it can be tempting to focus more on reinvesting in your business rather than saving for retirement. That said, initiating a plan now enables you to:
- Leverage tax-deferred growth or penalty-free withdrawals in the future.
- Enjoy adjustable savings that change with your income.
- Establish a long-term safety measure that offers peace of mind, no matter how your business evolves.
The sooner you start, the less you’ll have to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the opportunity to concentrate on your dreams—both for your retirement years and your Sacramento, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for self-employed individuals in Sacramento, CA, each providing its own advantages and considerations. A financial advisor can help you understand the advantages and disadvantages of each option and determine the one most suitable for your circumstances. Generally speaking, your self-employed retirement plan options in Sacramento, CA include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that include key tax perks. In a traditional IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but money taken out during retirement are subject to income tax. In contrast, Roth IRA contributions using income already taxed, but eligible distributions during retirement, including earnings, are not taxed. In both cases, withdrawals come without penalties as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that permits entrepreneurs to contribute a percentage of their net earnings. Contributions must come from an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) allocate. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a fixed dollar figure or a percentage of wages to employee accounts. SEP IRAs is a good option for entrepreneurs facing periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs function like conventional IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Both employers and self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan intended for businesses without employees or when the sole employee is your spouse. This type of plan operate much like traditional employer-managed 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This offers more savings versus SEPs or IRAs; however, the additional opportunities may be offset by more constrained investment avenues. 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: This plan is exclusively for business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you have the ability to make two types of contributions:
- Employee contributions of up to 100% of your earned income from self-employment, capped at the annual contribution limit. In 2025, those limits are $23,500, or $31,000 if you're over 50, or $34,750 if you attain age 60-63 in 2025.
- Contributions as an employer (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 employee contributions you made.
The total contribution cannot exceed $70,000, or $77,500 for individuals aged 50+ (in 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that delivers a pre-established payout to business owners upon retirement. In contrast to the plans discussed earlier, this plan is not influenced by market performance, but enables participants to determine the precise amount they'll get in retirement. This option is recommended for higher-income self-employed individuals who want to save a significant sum for retirement and can commit to making larger deposits. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income in retirement.
Eligibility: Entrepreneurs running an owner-only business or with less than five employees may establish an individual defined benefit plan, but it's typically advised for people above age 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Businesses currently investing 3-4% but are open to increasing contributions
- Companies that have demonstrated consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The contribution limit must be determined by an actuary based on your income, age, and retirement goals. Limits on contributions change annually.
The Importance of a Financial Advisor in Sacramento, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Sacramento, CA specialized in self-employed retirement plans is an essential partner for self-employed individuals. They have the expertise to help understand the intricacies of saving for retirement and develop a personalized approach that matches your objectives. Your advisor in Sacramento, CA will evaluate your financial situation, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. Included in what we do for you includes:
- Help you choose a plan that suits your unique requirements
- Tailor the plan to fit you personally even further
- Adopt a written plan as required by IRS rules
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Track and fine-tune your plan as needed
- Provide ongoing education and advice throughout your retirement planning process
- Maximize what you receive in retirement by maximizing your social security benefits
Self-Employed Retirement Plans in Sacramento, CA: Correct Capital's Process
Sacramento, CA business owners who don’t have the time or expertise to oversee their own retirement planning on their own often feel overwhelmed by their choices. At Correct Capital, our Sacramento, CA financial advisors take on the lion's share of your retirement strategy 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 four simple steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction helps us understand what you're looking for with no pressure or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including how many employees you have (if any), your current financial situation, and your future objectives. This enables us to craft a personalized strategy that aligns with your goals.
- Review Your Plan: After we put together a plan based on the information you provide, we'll sit down with you and go over your plan in detail to ensure you understand it and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll implement the necessary steps so you can start saving. As time goes on, we'll check in and monitor your plan to ensure it stays suited to your needs.
Our Sacramento, CA financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Sacramento, CA include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Sacramento, CA
To you, your business is more than "just a business", and your Sacramento, CA financial advisors need to offer more than just good financial guidance. Correct Capital takes pride in, we make it a priority to understand our clients and their businesses to create personalized self-employed retirement plans. To every client in Sacramento, CA, we provide our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To get started on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
