Self-employed retirement plans Sacramento, CA. The freedom of owning your own business in Sacramento, CA offers many benefits of being self-employed. That said, this independence often comes with potential drawbacks, notably in terms of building your retirement fund, because you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless should consider exploring their options. In addition to achieving a more comfortable retirement, seeking advice from a financial advisor in Sacramento, CA to create your self-employed retirement plan can provide significant tax advantages that enable your business to grow and succeed.
Few Sacramento, CA wealth management and retirement planning firms are as attuned to the requirements of entrepreneurs better than Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (learn more about our story here), and our firm have a rich history of helping businesses with their retirement planning needs. We understand that your professional and personal aspirations aren’t limited to just monetary concerns, and we work tirelessly to provide personalized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Sacramento, CA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial 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. Offering flexibility in contributions to substantial tax savings, partnering with a financial advisor in Sacramento, CA allows you to customize your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
For those with fluctuating income over time, a plan like a SEP IRA or Solo 401(k) provides the flexibility to tailor how much you save:
- Customizable Contributions: Contribute more during high-income years and reduce savings when your earnings dip, ensuring your plan works with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw tax-free later—a wise move if you believe your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, allowing you to keep more of your income.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to compound.
- State-Specific Incentives: In some states, you might access additional tax breaks as a self-employed individual. These local incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can take advantage of a credit of up to 50% of the first $2,000 contributed a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across a mix of stocks, bonds, and alternatives is a smart way to reduce risk while helping to grow your savings.
- Emergency Back-Up: Pairing your retirement plan with a financial buffer for your business prevents you from tapping into your nest egg during tough times and facing tax penalties.
Plan for the Future of Your Sacramento, CA Business
A thoughtful retirement strategy also helps you plan ahead for 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 stay in your name and don’t transfer with the business. These accounts ensure the reliable income you’ll need during retirement. Keep in mind 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 a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you might face when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts offer a stable foundation as you make this shift. You can also partner with a financial advisor experienced in both succession and retirement strategies to reduce taxes associated with the transaction.
With the right retirement plan, you manage your financial future, cut down your tax obligations, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Sacramento, CA Now?
There’s no denying that time is one of the most crucial resources when it comes to saving for retirement. Getting a head start not only allows you to build a more substantial retirement fund but also minimizes the pressure of playing catch-up as you get older. Here’s why it makes sense to begin today:
The Cost of Waiting
Waiting to start your retirement fund may cause a significant impact on the total you’ll have when you retire. The primary reason is compound interest—the powerful process where your investments grow, and those returns, in turn, accumulate even more returns. The longer your money has to grow, the greater the impact 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 delays savings until age 40 but contributes $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and achieves a total of $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time often create substantial growth. Consider this example showing the impact of compound interest:
- Starting at age 25: If you invest $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month leaves you with only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
Starting sooner, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example are estimates calculated using NerdWallet’s Compound Interest Calculator, based on a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. The scenarios provided are meant to provide general guidance and cannot predict actual future outcomes. Your individual results may differ due to variables including market conditions, fees, and personal factors. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Sacramento, CA, it is often the case that you prioritize reinvesting in your business rather than saving for retirement. That said, starting a plan now allows you to:
- Benefit from tax-deferred growth or withdrawals without taxes later on.
- Enjoy flexible contributions that align with your income.
- Build a financial cushion that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll need to worry about playing catch-up later in life. Saving for retirement now means gaining control over your financial future and creating for yourself the ability to concentrate on your goals—both for your future retirement and your Sacramento, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for those working for themselves in Sacramento, CA, each with its own pros and cons. A financial advisor can help you learn about the benefits and drawbacks of each choice and choose the one most suitable for your circumstances. In most cases, your self-employed retirement plan options in Sacramento, CA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that include key tax perks. In a standard IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but retirement distributions are subject to income tax. In contrast, Roth IRA contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are exempt from taxes. In both cases, withdrawals are penalty-free if you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan 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 above the 25% you (the employer) already contributed. If you have employees, it's required to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan is a good option for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs are free of expensive setup or ongoing fees.
SEPs work like traditional IRAs, where you contribute pre-tax dollars and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, 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 savings option for the self-employed intended for businesses with no employees or when the sole employee is your spouse. Solo 401(k)s function similarly to employer-sponsored 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This offers more savings versus SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you have the ability to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your earned income from self-employment, subject to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 25% of your adjusted 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 $70,000, or $77,500 if you're over age 50 (as of 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans represents a type of retirement plan that delivers a pre-established payout to entrepreneurs upon retirement. Unlike defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand exactly how much they'll have in retirement. This strategy is ideal for high-earning professionals who are focused on saving a substantial amount for retirement and are willing to make sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs running an owner-only business or with less than five employees are eligible to open an individual defined benefit plan, but it's most commonly advised for those over 50 who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans include:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 for individuals 50 and older)
- Companies already contributing 3-4% and are willing to do more
- Businesses showing consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or boost savings within a short timeframe
Contribution Limits: The cap on contributions is calculated by an actuary based on your financial situation, age, and savings targets. Limits on contributions are updated yearly.
The Importance of a Financial Advisor in Sacramento, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Sacramento, CA experienced with retirement plans for the self-employed can be an invaluable resource for those working for themselves. They bring the skills needed to navigate the complexities of retirement planning and craft a customized plan that matches your objectives. Your advisor in Sacramento, CA will assess where you stand financially, identify your risk preferences, and assist you in selecting the best options about saving and investing for retirement. A key part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Customize the plan to your specific situation even further
- Adopt a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Offer continued financial education and guidance to help you navigate your retirement journey
- Boost your retirement earnings by maximizing your social security benefits
Self-Employed Retirement Plans in Sacramento, CA: Correct Capital's Process
Entrepreneurs in Sacramento, CA who don’t have the time or expertise to handle their own retirement planning themselves can become overwhelmed as they look at their choices. Through our team at Correct Capital, our Sacramento, CA financial advisors take on the lion's share of your savings plan setup for you, working to make meeting your financial objectives as hassle-free 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 can determine if our services align for you and your business. This brief introduction allows us to understand what you're looking for with zero commitment or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including your employee count, your current financial situation, and your retirement goals. This helps us create a personalized strategy that aligns with your goals.
- Review Your Plan: When we finalize a plan from the information you provide, we'll meet with you and discuss your plan step by step to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree 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 make sure it remains aligned with your goals.
Our Sacramento, CA financial advisors and retirement plan consultants are fiduciary advisors, who are obligated to they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Sacramento, CA include:
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 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 Sacramento, CA
To you, your business is more than "just a business", and your Sacramento, CA financial advisors need to offer more than basic financial recommendations. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to provide personalized self-employed retirement plans. We offer all our Sacramento, CA clients our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To get started on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
