Self-employed retirement plans Santa Clarita, CA. The flexibility of being your own boss in Santa Clarita, CA is one of the best aspects of working for yourself. However, this flexibility can come with potential drawbacks, particularly regarding planning for retirement, since you don't have access to a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, yet countless could benefit from exploring their options. In addition to enjoying a more secure retirement, working with a financial advisor in Santa Clarita, CA to set up your self-employed retirement plan can provide significant tax advantages that help both you and your business to thrive.
Few Santa Clarita, CA wealth management and retirement planning firms are as attuned to the requirements of entrepreneurs quite like 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 Correct Capital are deeply experienced in supporting entrepreneurs with their retirement planning needs. We recognize that your business and retirement aspirations go far beyond simple financial figures, and we are dedicated to offer personalized solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Santa Clarita, CA, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Santa Clarita, CA today.
Why Santa Clarita, 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. With customizable contribution options to significant tax savings, working with a financial advisor in Santa Clarita, CA helps you create your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the flexibility to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when revenues are down, so that your plan works with your cash flow.
- Roth Options: Choosing a Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw tax-free later—a smart decision if you expect your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA reduce what you owe in taxes, helping you keep more of your income.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, which gives your money more time to grow.
- State-Specific Incentives: Depending on where you live, you might access state-specific tax breaks as a business owner. These regional incentives make these plans even more beneficial.
- 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, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across different stocks, bonds, and alternatives can help minimize exposure to risk while continuing to build your retirement fund.
- Emergency Back-Up: Supplementing your retirement savings with a business emergency fund prevents you from dipping into savings during tough times and incurring penalties.
Plan for the Future of Your Santa Clarita, CA Business
Preparing for retirement also helps you think through what’s next with your Santa Clarita, CA business:
- Selling Your Business: When selling your business, accounts such as SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These plans offer the reliable income you’ll need during retirement. Remember that while selling a business often leads to 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, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings can reduce the taxes you might face when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement savings ensure the funds you need through the transition. You might want to work with a financial advisor who specializes in succession planning and retirement accounts to help with taxes on the sale.
With the right retirement plan, you manage your financial future, reduce your tax burden, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Santa Clarita, CA Now?
Time is one of the most crucial resources in retirement planning. Beginning sooner rather than later not only allows you to build a more substantial retirement fund but also lowers the stress of saving aggressively in the future. Here’s why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings may cause a major impact on the savings you’ll have when you reach retirement age. The main reason is compound interest—the powerful process where your investments generate earnings, and those returns, subsequently, accumulate even more returns. The more time your money has to grow, the greater the effect of compounding.
Example: 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 postpones starting contributions to age 40 but saves $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 contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments contributed over time may result in substantial growth. Take a look at this scenario 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 end up with $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 gap of over $260,000, just from a 10-year delay.
Saving early, the less effort required each year to meet your retirement goals.
*The numbers shown in this scenario are estimates derived from NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are for illustrative purposes only and are not a promise of future results. Actual results may vary due to factors such as market conditions, fees, and personal factors. Be sure to speak with a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in Santa Clarita, CA, it can be tempting to put more emphasis on reinvesting in your business rather than saving for retirement. Even so, starting a plan now enables you to:
- Take advantage of tax-free future growth or tax-free withdrawals later on.
- Benefit from contribution flexibility that align with your earnings.
- Establish a long-term safety measure that ensures stability, no matter how your business changes.
Starting early, the less you’ll have to worry about catching up later in life. Building your retirement savings today means gaining control over your financial future and creating for yourself the opportunity to concentrate on your dreams—both for your retirement years and your Santa Clarita, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for self-employed individuals in Santa Clarita, CA, each with its own pros and cons. A financial advisor is available to help you evaluate the benefits and drawbacks of each option and identify the one most suitable for your unique situation. Typically, 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 financial tools for retirement that provide specific tax advantages. In a traditional IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but withdrawals in retirement are taxable. In contrast, Roth IRAs require contributions are made with after-tax income, but retirement withdrawals that qualify, including earnings, are exempt from taxes. In both 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, traditional and Roth IRAs are available to anyone with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that allows those who are self-employed to set aside a portion of their self-employment income. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role above the 25% you (the employer) allocate. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan may be ideal for entrepreneurs facing periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs work like traditional 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 capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the contribution you can make 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 retirement savings plan designed for businesses without employees or where the only employee is a spouse. This type of plan are similar to employer-sponsored 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the increased savings potential can be balanced by more constrained investment avenues. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you can 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. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) are limited to 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the employee contributions you made.
The total contribution cannot exceed $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan offers a structured retirement solution that delivers a pre-established payout to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand what they'll have in retirement. This plan is ideal for wealthier professionals who aim to accumulate a substantial amount for retirement and are prepared to contribute substantial contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs operating a solo business or with a small staff of under five may establish an individual defined benefit plan, but it's generally suggested for people above age 50 who generate a minimum of $250,000 yearly. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% with plans to contribute more
- Organizations that have demonstrated consistent profit patterns
- Partners or owners over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions must be determined by an actuary using your income, age, and retirement goals. Contribution limits change annually.
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 is an important asset for entrepreneurs. They bring the skills needed to guide you through the challenges of retirement planning and develop a personalized approach that aligns with your goals. An expert in your area will evaluate your financial situation, determine how much risk you’re comfortable with, and assist you in choosing wisely about saving and investing for retirement. A key part of what we do for you includes:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Further adapt the plan to your specific situation even further
- Create a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance throughout your retirement planning process
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in Santa Clarita, CA: Correct Capital's Process
Santa Clarita, CA business owners who aren’t equipped with the time or understanding to handle their retirement savings strategy themselves can become overwhelmed by their options. Through our team at Correct Capital, our Santa Clarita, CA financial advisors handle the lion's share of your retirement planning for you, to help make meeting your retirement goals 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: In just 20 minutes, a member of our advisor team will assess if our services align for you and your business. This short conversation allows us to understand what you're looking for with no pressure or major time investment on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including how many employees you have (if any), your current financial situation, and your retirement goals. This enables us to craft a tailored approach suited specifically for your needs.
- Review Your Plan: Once we've developed a plan using the information you provide, we'll schedule a meeting and review your plan thoroughly to make sure it's clear and understand how it best correlates to your needs.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can initiate your savings journey. Throughout our relationship, we'll check in and review your strategy to make sure it remains aligned with your goals.
Our Santa Clarita, CA financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Santa Clarita, CA include:
- Investment Planning
- Retirement Financial Planning
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
Call Correct Capital for Your Self-Employed Retirement Plan in Santa Clarita, CA
You don't see your business as "just a business", and your Santa Clarita, CA financial advisors must deliver more than just good financial guidance. With Correct Capital, we take the time to get to know our clients and their businesses to deliver personalized self-employed retirement plans. To every client in Santa Clarita, CA, we provide our I.O.U. promise: everything we recommend 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.
