Self-employed retirement plans Santa Clarita, CA. The freedom of being your own boss in Santa Clarita, CA is one of the greatest advantages of having a self-directed career. However, this independence sometimes brings with certain challenges, notably when it comes to retirement savings, since you don't have the benefit of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from exploring their options. In addition to enjoying a more secure retirement, seeking advice from a financial advisor in Santa Clarita, CA to establish your self-employed retirement plan offers significant tax advantages that enable your business to grow and succeed.
Few Santa Clarita, CA financial advisory and retirement planning firms truly grasp the challenges faced by self-employed individuals better than Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and we take pride in helping businesses with their retirement planning needs. We know that your professional and personal aspirations go far beyond just monetary concerns, and we are dedicated to provide customized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Santa Clarita, CA, or give us a call at Correct Capital at 877-930-401k or contact us online to speak with a small business financial advisor in Santa Clarita, CA today.
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Why Santa Clarita, 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 deliver tangible benefits today. From flexible contributions to significant tax savings, partnering with a financial advisor in Santa Clarita, CA enables you to design your retirement plan to suit your specific needs.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) offers the freedom to adjust how much you save:
- Customizable Contributions: Contribute more during profitable years and scale back when income is lower, ensuring your plan fits your current income.
- 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 smart decision if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) reduce what you owe in taxes, so you can keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, providing your money more time to accumulate.
- State-Specific Incentives: In some states, you might access extra tax breaks as a business owner. These regional incentives help make these plans even more advantageous.
- 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, further reducing 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 determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across different asset classes like stocks and bonds serves to minimize exposure to risk while still growing your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t tapping into your nest egg during tough times and risking extra costs.
Plan for the Future of Your Santa Clarita, CA Business
Retirement planning enables you to plan ahead for what’s next with your Santa Clarita, CA business:
- Selling Your Business: When selling your business, 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 reliable income you’ll need later on. It’s important to note that while the sale of a business usually creates a capital gain, contributions to retirement accounts are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Strategically planning your contributions 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 financial security through the transition. You might want to seek advice from a financial advisor experienced in both succession and retirement strategies to reduce taxes during the sale.
With the right retirement plan, you manage your financial future, cut down your tax obligations, and create a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Santa Clarita, CA Now?
There’s no denying that time is one of the most important resources when it comes to saving for retirement. Getting a head start not only lets you accumulate a larger nest egg but also lowers the pressure 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 may cause a substantial impact on the total you’ll have when you stop working. The primary reason is compound interest—the financial principle where your investments earn returns, and those returns, in turn, earn even more returns. The longer your money has to grow, the more significant the benefit of this growth.
Example: Alex and Taylor are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but contributes $7,500 annually to make up for lost time.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor invests $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time often create substantial growth. Consider this example showing the power of compounding:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the less you need to save each year to achieve your retirement goals.
*These calculations represent estimates generated with NerdWallet’s Compound Interest Calculator, with the assumption of 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 depending on elements like market conditions, fees, and individual circumstances. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Santa Clarita, CA, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. However, beginning a plan now allows you to:
- Leverage growth that is tax-deferred or penalty-free withdrawals later on.
- Benefit from flexible contributions that change with your income.
- Establish a long-term safety measure that provides security, no matter how your business evolves.
Starting early, the less you’ll be required to worry about catching up later in life. Saving for retirement now means managing your financial future and creating for yourself the freedom to focus on your goals—both for your future retirement and your Santa Clarita, CA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for entrepreneurs in Santa Clarita, CA, each offering its own advantages and considerations. A financial advisor can help you learn about the advantages and disadvantages of each plan and identify the one most suitable for your circumstances. Generally speaking, your self-employed retirement plan options in Santa Clarita, CA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that include key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and investment earnings grow tax-deferred, but retirement distributions are taxed as income. In contrast, Roth IRAs require contributions are made with after-tax income, but retirement withdrawals that qualify, including earnings, are not taxed. In both cases, withdrawals are penalty-free as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, IRAs, including traditional and Roth options are accessible for individuals with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs offers a way to save for retirement that permits self-employed individuals to contribute a percentage of their net earnings. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. 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. SEP IRAs works well for businesses that experience fluctuating revenue streams. Unlike other plans, SEP IRAs are free of expensive setup or ongoing fees.
SEPs work like traditional 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 are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for companies that have no employees or where the only employee is a spouse. These plans are similar to employer-sponsored 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This offers more savings versus SEPs or IRAs; however, the extra savings options can be balanced by 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: Solo 401(k)s are available solely to business owners and their spouses may establish 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:
- Deferrals as an employee of up to 100% of your earned income from self-employment, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your adjusted self-employment income, 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 if you're over age 50 (for 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan represents a type of retirement plan that provides a fixed, predetermined benefit to business owners upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but lets individuals clearly understand the precise amount they'll get in retirement. This plan is recommended for wealthier professionals who aim to accumulate a significant sum for retirement and are prepared to contribute substantial contributions. Contributions offer tax-deferred growth, and withdrawals are taxed as income upon retirement.
Eligibility: Any self-employed individual operating a solo business or employing fewer than five people may establish an individual defined benefit plan, but it's generally suggested for individuals aged 50+ who make $250,000 or more annually. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% but are open to increasing contributions
- Organizations showing 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 must be determined by an actuary using your earnings, age, and retirement objectives. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Santa Clarita, CA for Your Self-Employed Retirement Plan
Working with a financial advisor in Santa Clarita, CA experienced with retirement plans for the self-employed can be an essential partner for entrepreneurs. They offer the knowledge to assist understand the intricacies of saving for retirement and craft a tailored strategy that matches your objectives. Your advisor in Santa Clarita, CA will review your finances, understand your risk tolerance, and help you in selecting the best options about saving and investing for retirement. Included in what we do for you features:
- Assist in selecting a plan that suits your unique requirements
- Further adapt the plan to fit you personally even further
- Create a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance as you continue on the road to retirement
- Maximize what you receive in retirement by making the most of your social security
Self-Employed Retirement Plans in Santa Clarita, CA: Correct Capital's Process
Self-employed individuals in Santa Clarita, CA who don’t have the time or expertise to manage their retirement savings strategy independently may end up overwhelmed by their choices. With Correct Capital, our Santa Clarita, CA financial advisors manage the bulk of your savings plan setup for you, and strive to ensure meeting your retirement goals as straightforward 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 lets us understand what you're looking for with no obligation or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll gather information, including whether you have employees, your present financial standing, and your future objectives. This allows us to put together a personalized strategy suited specifically for your needs.
- Review Your Plan: When we finalize a plan using the information you provide, we'll sit down with you and review your plan thoroughly to help you fully grasp it and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can begin contributing. Throughout our relationship, we'll have regular meetings and monitor your plan to make sure it remains aligned with your goals.
Our Santa Clarita, CA financial advisors and retirement plan consultants serve as fiduciary advisors, which means they are required by law and ethical standards to act in your best interest.
Other financial advisory services we offer in Santa Clarita, 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 Santa Clarita, CA
Your business isn't "just a business" to you, and your Santa Clarita, CA financial advisors must deliver 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 deliver customized self-employed retirement plans. To every client in Santa Clarita, CA, we provide our I.O.U. promise: all of the advice you get from us 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.
