Self-employed retirement plans Santa Rosa, CA. The independence of owning your own business in Santa Rosa, CA is one of the best aspects of working for yourself. However, this freedom can come with a lack of security, especially in terms of building your retirement fund, because you don't have the benefit of a workplace retirement plan. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider looking into other possibilities. In addition to enjoying a more secure retirement, partnering with a financial advisor in Santa Rosa, CA to set up your self-employed retirement plan delivers significant tax advantages that help both you and your business to thrive.
Few Santa Rosa, CA financial advisory and retirement planning firms understand the needs of small business owners quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (read more of our story here), and Correct Capital are deeply experienced in assisting business owners in their retirement planning needs. We understand that your goals for your business and retirement extend well past just monetary concerns, and we strive to create personalized solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Santa Rosa, CA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Santa Rosa, CA today.
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Why Santa Rosa, 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 real benefits today. From flexible contributions to considerable tax savings, partnering with a financial advisor in Santa Rosa, CA helps you customize your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, 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 successful years and reduce savings when income is lower, so your plan fits your financial situation.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw tax-free later—an advantageous choice if you expect your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, helping you keep more of your earnings.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to accumulate.
- State-Specific Incentives: Based on your location, you may be eligible for extra tax breaks as a business owner. These state-level incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a 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
Planning for a safe retirement requires more than 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 still growing your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net prevents you from using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Santa Rosa, CA Business
Retirement planning also helps you think through what’s next with your Santa Rosa, CA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain yours and won’t be included in the sale. These plans ensure the reliable income you’ll need in the future. Remember that while selling a business often leads to a capital gain, retirement plan contributions are subject to yearly maximums (e.g., a maximum of $7,000 for IRAs or a maximum of $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 might face when you transfer your business.
- Succession Planning: If you’re passing the business on, your retirement savings provide financial security during the change. You can also seek advice from a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens associated with the transaction.
With the proper savings strategy, you can take control of 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 Santa Rosa, CA Now?
Time is one of the most important factors for building your retirement fund. Beginning sooner rather than later not only lets you accumulate a larger nest egg but also minimizes the pressure of saving aggressively in the future. This is why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund may cause a significant impact on the amount you’ll have when you stop working. The primary reason is compound interest—the financial principle where your investments grow, and those returns, then, accumulate even more returns. The longer your money has to grow, the more significant the impact of compounding.
Example: Two individuals, 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 puts away $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily may result in significant growth. Consider this example showing the effect 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 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 shortfall of over $260,000, simply due to a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example are based on 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. These examples are for illustrative purposes only and are not a promise of future results. Your individual results may differ based on factors such as market conditions, fees, and your unique situation. We recommend consulting a financial advisor for personalized advice.
Take Control of Your Financial Future
As a self-employed person in Santa Rosa, CA, it can be tempting to focus more on reinvesting in your business rather than saving for retirement. However, starting a plan now allows you to:
- Benefit from tax-free future growth or tax-free withdrawals down the road.
- Benefit from flexible contributions that change with your cash flow.
- Establish a long-term safety measure that offers peace of mind, no matter how your business changes.
Starting early, the less you’ll need to worry about making up for lost time later in life. Taking steps toward your retirement goals today means managing your financial future and giving yourself the opportunity to turn your attention to your dreams—both for your future retirement and your Santa Rosa, CA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options open for self-employed individuals in Santa Rosa, 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 choice and determine the one most suitable for your unique situation. In most cases, your self-employed retirement plan options in Santa Rosa, CA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that offer key tax perks. In a standard IRA, the money you contribute is often tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxed as income. In contrast, with Roth IRAs, you contribute from post-tax earnings, but retirement withdrawals that qualify, including earnings, are not taxed. In both types of accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are accessible for individuals with taxable earnings.
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 serves as a retirement savings option that permits entrepreneurs to save a percentage of their net business profits. Contributions must come from an employer, so, as a sole proprietor, you (the employee) cannot make additional contributions above the 25% you (the employer) already contributed. 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 flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be ideal for companies with fluctuating revenue streams. Compared to other retirement options, SEP IRAs don’t have costly startup or administrative fees.
SEPs operate like standard IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
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: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses without employees or where the only employee is a spouse. Solo 401(k)s function similarly to traditional employer-managed 401(k) plans, and enable contributions as both an employee or an employer with pre-tax money. This offers more savings versus SEPs or IRAs; however, the extra savings options often come with more restricted investment choices. 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: Solo 401(k)s are available solely to 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 are allowed to make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employment income, subject to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) cannot exceed 25% of your net 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 individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that guarantees a set amount to self-employed individuals upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but enables participants to determine exactly how much they'll get in retirement. This plan is recommended for higher-income self-employed individuals who want to save a significant sum for retirement and are prepared to contribute substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income during retirement.
Eligibility: Self-employed professionals running an owner-only business or employing fewer than five people are eligible to open an individual defined benefit plan, but it's typically recommended for individuals aged 50+ who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Entrepreneurs who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Companies that have demonstrated consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The cap on contributions must be determined by an actuary determined by your earnings, age, and retirement objectives. Allowable contributions change annually.
The Importance of a Financial Advisor in Santa Rosa, CA for Your Self-Employed Retirement Plan
A financial advisor in Santa Rosa, CA specialized in self-employed retirement plans can be an important asset for entrepreneurs. They offer the knowledge to assist navigate the complexities of retirement planning and develop a tailored strategy that aligns with your goals. A financial advisor in Santa Rosa, CA will review your finances, understand your risk tolerance, and help you in choosing wisely about saving and investing for retirement. Part of what we do for you includes:
- Assist in selecting a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Formalize a plan in writing that complies with IRS regulations
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Track and fine-tune your plan when necessary
- Provide ongoing education and advice throughout your retirement planning process
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Santa Rosa, CA: Correct Capital's Process
Entrepreneurs in Santa Rosa, CA who aren’t equipped with the time or understanding to manage their own retirement planning themselves often feel overwhelmed when faced with their available plans. Through our team at Correct Capital, our Santa Rosa, CA financial advisors handle the lion's share of your retirement planning for you, and strive to ensure meeting your future savings targets as easy as possible for you. We will guide you in creating your self-employed retirement plan in four simple steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can determine if our services align for you and your business. This initial call helps us understand what you're looking for with no obligation or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including how many employees you have (if any), your present financial standing, and your future objectives. This allows us to put together a tailored approach that aligns with your goals.
- Review Your Plan: Once we've developed a plan based on the information you provide, we'll meet with you and go over your plan step by step to help you fully grasp it and explain its fit to your circumstances.
- Implementation and Monitoring: Once we've agreed on your plan, we'll set everything up so you can start saving. Over the course of our partnership, we'll meet with you and review your strategy to keep it tailored to your evolving circumstances.
Our Santa Rosa, CA financial advisors and retirement plan consultants are fiduciary advisors, meaning they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Santa Rosa, 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 Rosa, CA
You don't see your business as "just a business", and your Santa Rosa, CA financial advisors must deliver more than just good financial guidance. At Correct Capital, we focus on building a relationship with our clients and their businesses to create personalized self-employed retirement plans. We offer all our Santa Rosa, CA clients 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, reach out to Correct Capital at 877-930-401k or contact us online.
