Self-employed retirement plans Seattle, WA. The independence of owning your own business in Seattle, WA is one of the greatest advantages of having a self-directed career. That said, this freedom sometimes brings with potential drawbacks, notably regarding planning for retirement, because you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off exploring their options. In addition to enjoying a more comfortable retirement, seeking advice from a financial advisor in Seattle, WA to set up your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Seattle, WA financial advisory and retirement planning firms understand the needs of small business owners as well as Correct Capital. Our founder's father was a small business owner himself (learn more about our story here), and we take pride in supporting entrepreneurs with their retirement planning needs. We recognize that your business and retirement aspirations go far beyond just monetary concerns, and we work tirelessly to offer tailored solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Seattle, WA, or reach out to Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Seattle, WA today.
Why Seattle, WA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also offer real benefits today. From flexible contributions to considerable tax savings, consulting a financial advisor in Seattle, WA helps you design 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) provides the freedom to adjust how much you save:
- Customizable Contributions: Set aside more during successful years and cut back when income is lower, so that your plan works with your current income.
- Roth Options: Choosing a Roth Solo 401(k) lets you settle taxes at the time of contribution, allowing you to withdraw your savings tax-free down the road—an advantageous choice if you expect your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) reduce what you owe in taxes, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, giving your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you might access state-specific credits as a self-employed individual. These state-level incentives can make these plans even more valuable.
- 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 put into a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across a mix of stocks, bonds, and alternatives is a smart way to reduce risk while still growing your savings.
- Emergency Back-Up: Supplementing your retirement savings with a dedicated business safety net helps you avoid using your retirement funds during financial hardships and incurring penalties.
Plan for the Future of Your Seattle, WA Business
Preparing for retirement can assist you prepare for what’s next with your Seattle, WA business:
- Selling Your Business: For those considering a sale, accounts such as SEP IRAs or Solo 401(k)s remain yours and are not part of the sale. These accounts can provide the financial stability you’ll need in the future. Keep in mind that while the sale of a business usually creates a capital gain, contributions to retirement accounts are subject to yearly maximums (e.g., up to $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: Strategically planning your contributions minimizes the taxes you are required to pay when you sell your business.
- Succession Planning: If you’re passing the business on, your nest egg offer the funds you need through the transition. You might want to seek advice from a financial advisor with expertise in succession and retirement planning to help with taxes during the sale.
With the right retirement plan, you can take control of your financial future, reduce your tax burden, and build a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Seattle, WA Now?
Time is one of the most crucial assets in retirement planning. Beginning sooner rather than later not only allows you to build a more substantial retirement fund but also lowers the pressure of catching up later in life. The following are reasons why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement could lead to a major impact on the savings you’ll have when you stop working. The main reason is compound interest—the financial principle where your investments grow, and those returns, then, generate even more returns. The greater time span your money has to grow, the more significant the impact of compounding.
Example: Taylor and Alex are both self-employed individuals. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but contributes $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and accumulates $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently often create impressive growth. Here’s a simple scenario showing the effect of compound interest:
- 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: Investing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Starting sooner, the lower your annual savings needs each year to meet your retirement goals.
*These calculations represent 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 for illustrative purposes only and do not guarantee future performance. Outcomes may change due to factors such as market conditions, fees, and your unique situation. 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 Seattle, WA, it is often the case that you focus more on reinvesting in your business rather than saving for retirement. However, initiating a plan now enables you to:
- Take advantage of tax-free future growth or penalty-free withdrawals down the road.
- Take advantage of contribution flexibility that align with your cash flow.
- Build a financial cushion that ensures stability, no matter how your business develops.
Starting early, the less you’ll be required to worry about catching up later in life. Building your retirement savings today means managing your financial future and giving yourself the opportunity to focus on your objectives—both for your retirement years and your Seattle, WA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for self-employed individuals in Seattle, WA, each with its own pros and cons. A financial advisor will guide you to learn about the advantages and disadvantages of each choice and choose the one ideal for your circumstances. Typically, your self-employed retirement plan options in Seattle, WA consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that provide key tax perks. In a standard IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but retirement distributions 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 don’t incur penalties as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options 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'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 permits entrepreneurs to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a self-employed individual, you (the employee) would not be able to contribute above 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 flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be ideal for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs work like conventional 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 must not exceed:
- 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 when the sole employee is your spouse. Solo 401(k)s operate much like traditional employer-managed 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This offers more savings versus SEPs or IRAs; however, the additional opportunities often come with more restricted investment choices. With this type of plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: If you are self-employed 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-employed earnings, 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.
- Profit-sharing contributions (as an employer) must not surpass 25% of your net earnings from self-employment, which is calculated as net profits less half of your self-employment tax and the employee contributions you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (as of 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 delivers a set amount to entrepreneurs upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but enables participants to determine the precise amount they'll get in retirement. This plan is recommended for wealthier self-employed individuals who aim to accumulate a significant sum for retirement and can commit to making larger deposits. Contributions offer tax-deferred growth, and withdrawals are taxed as income during retirement.
Eligibility: Any self-employed individual operating a solo business or with less than five employees may establish an individual defined benefit plan, but it's generally advised for individuals aged 50+ who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans are:
- Entrepreneurs who desire to contribute more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% with plans to contribute more
- Businesses with proven consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The maximum allowable contribution requires calculation from an actuary based on your earnings, age, and retirement objectives. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Seattle, WA for Your Self-Employed Retirement Plan
Working with a financial advisor in Seattle, WA focused on self-employed retirement strategies can be an invaluable resource for those working for themselves. They bring the skills needed to navigate the complexities of retirement planning and craft a tailored strategy that matches your objectives. Your advisor in Seattle, WA will evaluate your financial situation, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Tailor the plan to fit you personally even further
- Formalize a plan in writing in accordance with IRS guidelines
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Track and fine-tune your plan as needed
- Offer continued financial education and guidance throughout your retirement planning process
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Seattle, WA: Correct Capital's Process
Entrepreneurs in Seattle, WA who aren’t equipped with the time or understanding to manage their own retirement planning independently often feel overwhelmed by their available plans. At Correct Capital, our Seattle, WA financial advisors take on the lion's share of your savings plan setup for you, and strive to ensure meeting your retirement goals as straightforward as possible for you. We will guide you in creating your self-employed retirement plan in just four steps:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team can help understand if our services align for you and your business. This brief introduction lets us understand what you're looking for with no pressure or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll request information, including your employee count, your existing financial picture, and your long-term savings targets. This helps us create a custom plan designed just for you.
- Review Your Plan: Once we've developed a plan from the information you provide, we'll meet with you and discuss your plan thoroughly to help you fully grasp it and explain its fit to your circumstances.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can initiate your savings journey. Throughout our relationship, we'll meet with you and track your progress to keep it tailored to your evolving circumstances.
Our Seattle, WA financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are committed by law and ethics to prioritize your needs above all else.
Other financial advisory services we offer in Seattle, WA include:
- Family Wealth Planning
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
Call Correct Capital for Your Self-Employed Retirement Plan in Seattle, WA
To you, your business is more than "just a business", and your Seattle, WA financial advisors should provide more than just good financial guidance. Correct Capital takes pride in, we make it a priority to understand our clients and their businesses to create personalized self-employed retirement plans. We offer all our Seattle, WA clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
