Self-employed retirement plans San Jose, CA. The flexibility of running your own company in San Jose, CA is one of the best aspects of having a self-directed career. However, this independence often comes with potential drawbacks, particularly when it comes to retirement savings, because you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off exploring their options. In addition to having a more secure retirement, partnering with a financial advisor in San Jose, CA to establish your self-employed retirement plan offers significant tax advantages that enable both you and your business to thrive.
Few San Jose, CA financial advisory and retirement planning firms understand the needs of entrepreneurs better than Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (check out our story here), and our firm have a rich history of helping businesses with their retirement planning needs. We know that your professional and personal aspirations go far beyond basic numbers, and we strive to offer personalized solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in San Jose, CA, or call Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in San Jose, CA today.
Why San Jose, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also offer immediate benefits today. With customizable contribution options to significant tax savings, partnering with a financial advisor in San Jose, CA enables you to create your retirement plan to fit your unique financial situation.
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 tailor how much you save:
- Customizable Contributions: Save extra during profitable years and scale back when your earnings dip, so your plan fits your cash flow.
- 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—an advantageous choice if you expect your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, which gives your money more time to grow.
- State-Specific Incentives: Depending on where you live, you might access extra deductions as a sole proprietor. These regional incentives make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can take advantage of a credit of up to 50% of the first $2,000 put into a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement requires more than how much you save—it’s also about how you invest:
- Diversified Portfolios: Distributing your investments across varied asset classes like stocks and bonds is a smart way to reduce risk while continuing to build your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net ensures you don’t using your retirement funds during challenging periods and facing tax penalties.
Plan for the Future of Your San Jose, CA Business
Retirement planning enables you to think through what’s next with your San Jose, CA business:
- Selling Your Business: When selling your business, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and are not part of the sale. These accounts offer the steady income you’ll need later on. It’s important to note that while selling your business results in a capital gain, deposits into these plans are capped at annual limits (e.g., up to $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 minimizes the taxes you might face when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts offer a stable foundation through the transition. You may also partner with a financial advisor experienced in both succession and retirement strategies to minimize tax burdens during the sale.
With the proper savings strategy, you can take control of your financial future, lower your tax bill, and create a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in San Jose, CA Now?
Time is one of the most crucial assets for building your retirement fund. Starting early not only lets you accumulate a larger nest egg but also lowers the financial burden of catching up later in life. This is why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund can have a significant impact on the amount you’ll have when you stop working. The biggest reason is compound interest—the financial principle where your investments earn returns, and those returns, in turn, accumulate even more returns. The more time your money has to grow, the larger the effect of compounding.
Example: Two individuals, Alex and Taylor are both self-employed individuals. 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 accumulates $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently may result in impressive growth. Here’s a simple scenario showing the effect of compound interest:
- Starting at age 25: By investing $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 shortfall of over $260,000, simply due to a 10-year delay.
Saving early, the lower your annual savings needs each year to meet your retirement goals.
*The figures provided in this example are estimates generated with NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. These examples are meant to provide general guidance and cannot predict actual future outcomes. Your individual results may differ depending on variables including market conditions, fees, and personal factors. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
For self-employed individuals in San Jose, CA, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. That said, starting a plan now enables you to:
- Take advantage of tax-deferred growth or tax-free withdrawals in the future.
- Take advantage of flexible contributions that change with your income.
- Build a financial cushion that offers peace of mind, no matter how your business changes.
Getting started now, the less you’ll need to worry about making up for lost time later in life. Saving for retirement now means gaining control over your financial future and giving yourself the ability to focus on your goals—both for your golden years and your San Jose, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for those working for themselves in San Jose, CA, each with its own benefits and trade-offs. A financial advisor is available to help you learn about the advantages and disadvantages of each plan and determine the one ideal for your unique situation. Generally speaking, your self-employed retirement plan options in San Jose, CA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that offer key tax perks. In a conventional IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but withdrawals in retirement are taxed as income. In contrast, with Roth IRAs, you contribute from post-tax earnings, but qualified withdrawals in retirement, including earnings, are tax-free. In both accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, both traditional and Roth IRAs are accessible for individuals with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that allows self-employed individuals to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role above the 25% you (the employer) have designated. If you have employees, it's required to 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. SEP IRAs works well for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs lack expensive setup or ongoing fees.
SEPs function like traditional IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
Eligibility: Both employers and self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, 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. Solo 401(k)s are similar to standard 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This allows for more savings versus SEPs or IRAs; however, the extra savings options may be offset by more constrained investment avenues. With this type of plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions 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're over 50, or $34,750 for those who turn 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 for those aged 50 and older (for 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that guarantees a pre-established payout to entrepreneurs upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but enables participants to determine what they'll get in retirement. This strategy is best suited for higher-income professionals who aim to accumulate a large amount for retirement and are prepared to contribute larger deposits. Contributions are tax deferred, and withdrawals are taxable as income in retirement.
Eligibility: Self-employed professionals operating a solo business or with less than five employees are eligible to open an individual defined benefit plan, but it's generally advised for individuals aged 50+ who generate a minimum of $250,000 yearly. Generally, good candidates for defined benefit plans include:
- Entrepreneurs who desire to contribute more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% but are open to increasing contributions
- Businesses with proven consistent profit patterns
- Entrepreneurs over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution is calculated by an actuary using your income, age, and retirement goals. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in San Jose, CA for Your Self-Employed Retirement Plan
A financial advisor in San Jose, CA focused on self-employed retirement strategies serves as an invaluable resource for self-employed individuals. They offer the knowledge to assist navigate the complexities of retirement planning and develop a customized plan that aligns with your goals. A financial advisor in San Jose, CA will review your finances, determine how much risk you’re comfortable with, and assist you in selecting the best options about saving and investing for retirement. Part of what we do for you features:
- Help you choose a plan that aligns with your objectives and circumstances
- Tailor the plan to fit you personally even further
- Formalize a plan in writing as required by IRS rules
- Set up an asset trust plan
- Help you understand the plan's terms
- Monitor and adjust your plan when necessary
- Deliver continuous support and financial insights as you continue on the road to retirement
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in San Jose, CA: Correct Capital's Process
Entrepreneurs in San Jose, CA who aren’t equipped with the time or understanding to manage their own retirement planning themselves often feel overwhelmed when faced with their choices. At Correct Capital, our San Jose, CA financial advisors handle the bulk of your retirement strategy for you, working to make meeting your future savings targets as easy 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: 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 initial call helps us get a sense of your goals with no pressure or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including whether you have employees, your present financial standing, and your long-term savings targets. This allows us to put together a tailored approach suited specifically for your needs.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll meet with you and go over your plan step by step to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: Once we've agreed on your plan, we'll implement the necessary steps so you can start saving. Over the course of our partnership, we'll have regular meetings and track your progress to make sure it remains aligned with your goals.
Our San Jose, CA financial advisors and retirement plan consultants are fiduciary advisors, who are obligated to they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in San Jose, 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 San Jose, CA
Your business isn't "just a business" to you, and your San Jose, CA financial advisors need to offer more than basic financial recommendations. Correct Capital takes pride in, we make it a priority to understand our clients and their businesses to provide tailored self-employed retirement plans. To every client in San Jose, 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, reach out to Correct Capital at 877-930-401k or contact us online.
