Self-employed retirement plans Salinas, CA. The independence of running your own company in Salinas, CA is one of the best aspects of being self-employed. That said, this freedom sometimes brings with certain challenges, particularly when it comes to building your retirement fund, because you don't have the benefit of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, yet countless should consider exploring their options. In addition to having a more comfortable retirement, working with a financial advisor in Salinas, CA to set up your self-employed retirement plan can provide significant tax advantages that help both you and your business to thrive.
Few Salinas, CA wealth management and retirement planning firms truly grasp the challenges faced by entrepreneurs quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (check out our story here), and Correct Capital have a rich history of helping businesses with their retirement planning needs. We know that your professional and personal aspirations aren’t limited to just monetary concerns, and we are dedicated to create customized solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Salinas, CA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Salinas, CA today.
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Why Salinas, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide real benefits today. With customizable contribution options to significant tax savings, consulting a financial advisor in Salinas, CA helps you design your retirement plan to suit 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) offers the option to modify how much you save:
- Customizable Contributions: Save extra during high-income years and cut back when revenues are down, so that your plan aligns with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw without tax penalties in the future—a wise move if you believe your tax rate to be higher in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, helping you keep more of your income.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, providing your money more time to grow.
- State-Specific Incentives: Based on your location, you may be eligible for additional tax breaks as a self-employed individual. These local incentives make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 they contribute a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Distributing your investments across different stocks, bonds, and other assets serves to mitigate financial risk while continuing to build your retirement fund.
- Emergency Back-Up: Pairing your retirement plan with a dedicated business safety net prevents you from using your retirement funds during financial hardships and incurring penalties.
Plan for the Future of Your Salinas, CA Business
A thoughtful retirement strategy enables you to prepare for what’s next with your Salinas, CA business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and won’t be included in the sale. These accounts can provide the financial stability you’ll need later on. It’s important to note 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, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you’ll owe when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement savings provide a stable foundation as you make this shift. You may also work with a financial advisor with expertise in succession and retirement planning to help with taxes associated with the transaction.
With the proper savings strategy, you can take control of your financial future, cut down your tax obligations, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Salinas, CA Now?
Time is one of the most valuable resources when it comes to saving for retirement. Starting early not only helps you grow a more substantial retirement fund but also minimizes the stress of playing catch-up as you get older. This is why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund could lead to a substantial impact on the amount you’ll have when you retire. The primary reason is compound interest—the financial principle where your investments grow, and those returns, subsequently, accumulate even more returns. The more time your money has to grow, the more significant the impact of this compounding process.
Example: Alex and Taylor are both entrepreneurs. Their shared goal is to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but puts away $7,500 annually to catch up.
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 may result in impressive growth. Here’s a simple scenario showing the impact of compounding:
- Starting at age 25: By investing $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: Investing the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, all because of a 10-year delay.
Saving early, the less you need to save each year to achieve your retirement goals.
*These calculations represent estimates derived from NerdWallet’s Compound Interest Calculator, based on a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are intended as illustrative examples and do not guarantee future performance. Your individual results may differ based on variables including market conditions, fees, and your unique situation. Always consult a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
If you’re self-employed in Salinas, CA, it is often the case that you focus more on reinvesting in your business rather than saving for retirement. That said, initiating a plan now gives you the chance to:
- Leverage tax-deferred growth or tax-free withdrawals in the future.
- Benefit from contribution flexibility that adapt to your income.
- Build a safety net that offers peace of mind, no matter how your business changes.
Starting early, the less you’ll need to worry about catching up later in life. Saving for retirement now means managing your financial future and allowing yourself the ability to focus on your objectives—both for your retirement years and your Salinas, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for entrepreneurs in Salinas, CA, each offering its own advantages and considerations. A financial advisor is available to help you learn about the advantages and disadvantages of each plan and choose the one ideal for your unique situation. Typically, your self-employed retirement plan options in Salinas, CA include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that provide distinct tax benefits. In a traditional IRA, you can usually deduct your contributions from taxable income, 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 retirement withdrawals that qualify, including earnings, are exempt from taxes. In both types of accounts, withdrawals come without penalties if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, both traditional and Roth IRAs are open to those with an earned 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 is a retirement plan that allows entrepreneurs to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a independent business owner, you (the employee) cannot make additional contributions more than the 25% you (the employer) have designated. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a fixed dollar figure or a percentage of wages to employee accounts. This type of plan is a good option for entrepreneurs facing periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs function like traditional IRAs, where you contribute pre-tax dollars and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for companies that have no employees or when the sole employee is your spouse. These plans 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 allows for more savings versus SEPs or IRAs; however, the additional opportunities can be balanced by more constrained investment avenues. Using a solo 401(k), you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for 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 can make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employed earnings, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you're over 50, or $34,750 if you attain age 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your adjusted self-employment income, which is calculated as net profits less half of your self-employment tax and the elective deferrals you made.
Your combined contributions must not surpass $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: A defined benefit plan is a retirement option that guarantees a fixed, predetermined benefit to self-employed individuals upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but lets individuals clearly understand what they'll receive in retirement. This plan is recommended for wealthier professionals who are focused on saving a substantial amount for retirement and are willing to make larger deposits. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income upon retirement.
Eligibility: Entrepreneurs managing a one-person company or employing fewer than five people can open an individual defined benefit plan, but it's typically suggested for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans tend to be:
- Partners or owners who want to invest more than $70,000 (or $77,500 for individuals 50 and older)
- Companies already contributing 3-4% and are willing to do more
- Companies with proven consistent profit patterns
- Business leaders over age 40 who wish to accelerate savings or boost savings within a short timeframe
Contribution Limits: The cap on contributions is calculated by an actuary determined by your financial situation, age, and savings targets. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Salinas, CA for Your Self-Employed Retirement Plan
A financial advisor in Salinas, CA specialized in self-employed retirement plans is an important asset for those working for themselves. They offer the knowledge to assist navigate the complexities of retirement planning and develop a personalized approach that reflects your aspirations. Your advisor in Salinas, CA will evaluate your financial situation, determine how much risk you’re comfortable with, and guide you in choosing wisely about saving and investing for retirement. Part of what we do for you includes:
- Help you choose a plan that suits your unique requirements
- Further adapt the plan to your needs even further
- Create a written plan in accordance with IRS guidelines
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Monitor and adjust your plan when necessary
- Offer continued financial education and guidance as you continue on the road to retirement
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Salinas, CA: Correct Capital's Process
Self-employed individuals in Salinas, CA who lack the time, interest, or knowledge to oversee their self-employed retirement plan on their own can become overwhelmed when faced with their options. With Correct Capital, our Salinas, CA financial advisors handle the lion's share of your retirement strategy for you, and strive to ensure meeting your retirement goals as straightforward as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team will assess if we're suited to your needs for you and your business. This short conversation helps us understand what you're looking for with no obligation or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll ask for information, including whether you have employees, your present financial standing, and your future objectives. This enables us to craft a custom plan suited specifically for your needs.
- Review Your Plan: When we finalize a plan from the information you provide, we'll meet with you and go over your plan in detail to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll put everything in place so you can start saving. Throughout our relationship, we'll have regular meetings and monitor your plan to keep it tailored to your evolving circumstances.
Our Salinas, CA financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Salinas, CA 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 Salinas, CA
To you, your business is more than "just a business", and your Salinas, CA financial advisors should provide more than simply sound financial advice. With Correct Capital, we focus on building a relationship with our clients and their businesses to deliver customized self-employed retirement plans. We offer all our Salinas, CA clients our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
