Self-employed retirement plans San Jose, CA. The flexibility of owning your own business in San Jose, CA is one of the greatest advantages of being self-employed. That said, this independence can come with certain challenges, especially when it comes to building your retirement fund, as you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider understanding their retirement options. In addition to enjoying a more secure retirement, partnering with a financial advisor in San Jose, CA to create your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few San Jose, CA investment consulting and retirement planning firms understand the needs of entrepreneurs quite like Correct Capital. Our founder's father was a small business owner himself (check out our story here), and we are deeply experienced in supporting entrepreneurs with their retirement planning needs. We understand that your goals for your business and retirement go far beyond just monetary concerns, and we strive to provide customized 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 speak with a small business financial advisor in San Jose, CA today.
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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 provide immediate benefits today. With customizable contribution options to substantial tax savings, consulting a financial advisor in San Jose, CA allows you to customize your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to tailor how much you save:
- Customizable Contributions: Save extra during high-income years and scale back when your earnings dip, ensuring your plan aligns with your current income.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw your savings tax-free down the road—an advantageous choice if you anticipate your tax rate is likely to rise in the future.
Save Money on Taxes
Plans designed for the self-employed deliver valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to grow.
- State-Specific Incentives: In some states, you may be eligible for additional deductions as a self-employed individual. These local incentives can make these plans even more advantageous.
- 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 contributed a retirement plan, cutting down 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 linked to the way you invest:
- Diversified Portfolios: Distributing your investments across a mix of asset classes like stocks and bonds is a smart way to minimize exposure to risk while continuing to build your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a dedicated business safety net helps you avoid tapping into your nest egg during challenging periods and risking extra costs.
Plan for the Future of Your San Jose, CA Business
A thoughtful retirement strategy also helps you prepare for what’s next with your San Jose, CA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and are not part of the sale. These accounts offer the steady income you’ll need during retirement. Keep in mind that while selling your business results in a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you might face when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts provide the funds you need as you make this shift. You might want to seek advice from a financial advisor who specializes in succession planning and retirement accounts to reduce taxes during the sale.
With the right retirement plan, you manage 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 San Jose, CA Now?
Time remains one of the most important assets in retirement planning. Getting a head start not only helps you grow a bigger financial cushion but also lowers the pressure of saving aggressively in the future. This is why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement can have a significant impact on the total you’ll have when you stop working. The main reason is compound interest—the financial principle where your investments grow, and those returns, in turn, generate even more returns. The longer your money has to grow, the more significant the impact of this growth.
Example: Two individuals, Alex and Taylor are both self-employed individuals. They each aim 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 saves $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex invests $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time may result in impressive growth. Take a look at this scenario showing the effect of consistent growth:
- Starting at age 25: If you invest $200 per month in a retirement plan with an average annual return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Saving 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.
Starting sooner, the less you need to save each year to reach your retirement goals.
*These calculations represent estimates calculated using 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 meant to provide general guidance and are not a promise of future results. Outcomes may change depending on factors such as market conditions, fees, and personal factors. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in San Jose, CA, it can be tempting to put more emphasis on reinvesting in your business rather than saving for retirement. That said, beginning a plan now gives you the chance to:
- Leverage tax-deferred growth or tax-free withdrawals later on.
- Enjoy contribution flexibility that adapt to your cash flow.
- Establish a safety net that ensures stability, no matter how your business develops.
Getting started now, the less you’ll be required to worry about catching up later in life. Taking steps toward your retirement goals today means taking control of your financial future and giving yourself the opportunity to concentrate on your objectives—both for your future retirement and your San Jose, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for self-employed individuals in San Jose, CA, each providing its own pros and cons. A financial advisor will guide you to evaluate the pros and cons of each option and identify the one most suitable for your needs. Typically, your self-employed retirement plan options in San Jose, CA include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that provide specific tax advantages. In a traditional IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but withdrawals in retirement are taxable. In contrast, Roth IRA contributions using income already taxed, but retirement withdrawals that qualify, including earnings, are not taxed. In both cases, withdrawals are penalty-free provided you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA offers a way to save for retirement that enables self-employed individuals to save a percentage of their net business profits. Contributions must come from an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role beyond the 25% you (the employer) allocate. If you have employees, you must 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. A SEP IRA is a good option for companies with fluctuating revenue streams. Unlike other plans, SEP IRAs lack expensive setup or ongoing fees.
SEPs operate like standard IRAs, where contributions are made with pre-tax money and retirement distributions are taxable.
Eligibility: Any employer, including the self-employed can establish 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 contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, also called an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for companies that have no employees or where the only employee is a spouse. Solo 401(k)s function similarly to standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This allows for more savings than SEPs or IRAs; however, the increased savings potential often come with more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which share 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 have the ability to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 if you attain age 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your net self-employment income, which is your net profit minus 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 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan is a retirement option that guarantees a fixed, predetermined benefit to entrepreneurs upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but lets individuals clearly understand exactly how much they'll receive in retirement. This strategy is ideal for higher-income professionals who want to save a large amount for retirement and are willing to make larger deposits. Contributions offer tax-deferred growth, and withdrawals incur taxes as income during retirement.
Eligibility: Entrepreneurs running an owner-only business or with a small staff of under five may establish an individual defined benefit plan, but it's typically suggested for people above age 50 who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans are:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 for those aged 50+)
- Companies already contributing 3-4% and are willing to do more
- Organizations showing consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The cap on contributions requires calculation from an actuary based on your financial situation, age, and savings targets. Contribution limits are updated yearly.
The Importance of a Financial Advisor in San Jose, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in San Jose, CA focused on self-employed retirement strategies can be an essential partner for self-employed individuals. They have the expertise to help guide you through the challenges of retirement planning and develop a tailored strategy that reflects your aspirations. Your advisor in San Jose, CA will assess where you stand financially, identify your risk preferences, and assist 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
- Tailor the plan to your needs even further
- Create a written plan that complies with IRS regulations
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Review and modify your plan as needed
- Provide ongoing education and advice throughout your retirement planning process
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in San Jose, CA: Correct Capital's Process
Entrepreneurs in San Jose, CA who don’t have the time or expertise to oversee their retirement savings strategy themselves may end up overwhelmed when faced with their options. At Correct Capital, our San Jose, CA financial advisors manage the lion's share of your savings plan setup for you, to help make meeting your financial objectives as straightforward as possible for you. We are here to assist you in setting 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 help understand if our services align for you and your business. This brief introduction helps us learn about your needs with no pressure or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll request information, including your employee count, your current financial situation, and your long-term savings targets. This helps us create a tailored approach designed just for you.
- Review Your Plan: After we put together a plan based on the information you provide, we'll meet with you and discuss your plan step by step to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. Throughout our relationship, we'll have regular meetings and review your strategy to ensure it stays suited to your needs.
Our San Jose, CA financial advisors and retirement plan consultants act as 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 San Jose, 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 San Jose, CA
You don't see your business as "just a business", and your San Jose, CA financial advisors should provide more than just good financial guidance. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to create personalized self-employed retirement plans. All our clients in San Jose, CA benefit from our I.O.U. promise: everything we recommend 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.
