Self-employed retirement plans in Shrewsbury, MO. The freedom of running your own business in Shrewsbury, MO is a fantastic aspect of being self-employed. But increased leeway can be accompanied by limited stability, particularly in in regards to saving for retirement, you don't have an employer who will set up a plan for you. Only 13% of self-employed individuals have a workplace retirement plan, but many would be wise to explore their options. In addition to setting you up for the golden years of your dreams, partnering with a financial advisor to get started and maintain your self-employed retirement plan in Shrewsbury, MO offers significant tax advantages that can help you improve your bottom line.
Not many financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner as well as Correct Capital. Our founder's father was a small business owner himself (you can learn more about our story on our website). We have a deep understanding that your business and retirement aspirations extend far beyond figures and numbers, and we are committed to offering personalized solutions that reflect where you are and where you want to go. Read on to learn more about your self-employed retirement plan options in Shrewsbury, MO, or call Correct Capital at 877-930-4015 or contact us online to speak to a small business financial advisor today.
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What Self-Employed Retirement Plans Are There?
There are a few different retirement savings plans available for self-employed individuals, each with its own set of benefits and considerations. A Shrewsbury, MO financial advisor can help you comprehend the benefits and drawbacks of each option and opt for that helps both your short- and long-term goals. Generally, your self-employed retirement plan options in Shrewsbury, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that allows you to set aside money for the future, with special tax considerations. In a traditional IRA, deposits are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxed as if it were income. On the other hand, Roth IRA contributions are made with money you've already paid taxes on, but you pay no taxes on withdrawals or earnings. In both a traditional an a Roth IRA, withdrawals can be made without penalty if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through an employer, traditional and Roth IRAs can be set up by anyone with an earned income.
Contribution Limits: For 2023, annual contribution limits for IRAs are $6,500, or $7,500 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that allows self-employed individuals to contribute a share of of their net earnings from self-employment. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. If you have employees, they must receive the same amount you do. You may choose to contribute either a predetermined fixed dollar amount or a proportion of wages to employee accounts. SEP IRAs may be a suitable self-employed retirement plan for businesses that go through fluctuating income periods. SEP IRAs don't have the costly startup or administrative fees other retirement plans do.
SEPs work like traditional IRAs, where payments are made with money you haven't paid taxes on and distributions are taxed as income.
Eligibility: Self-employed individuals and any employer, can establish a simplified employee pension plan.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the annual contribution limit is based on a specific formula.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan for sole proprietors or those whose only employee is a spouse. Solo 401(k)s work about the same as employer-sponsored 401(k) plans, and you can make contributions as both an employer or employee with pre-tax money. This offers greater potential for savings than SEPs or IRAs, however the possibility of greater retirement savings is often counterbalanced by more limited investment options. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each feature the same tax advantages as their IRA contribution counterparts.
Eligibility: Only self-employed individuals and their spouses can establish and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you can make two types of contributions:
- Elective deferrals (as an employee) of 100% of your earned income from self-employment, up to the annual contribution limit. In 2023, those limits are $22,500, or $30,000 if you are 50 or older.
- Employer profit-sharing contributions (as an employer) of a maximum of 25% of your net self-employment income, which is your net profit minus half of your self-employment tax and the elective deferrals you made.
On an annual basis, contributions cannot exceed $66,000, or $73,500 if you're over age 50 (in 2023).
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement plan that provides a a fixed benefit to self-employed individuals after they've left the workforce. As opposed to 401(k)s or IRAs, a defined benefit plan doesn't oscillate because of investment gains, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a significant sum for retirement and want to add significant contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs a business where they're the only owner or has less than five employees can open an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans are:
- Partners or owners who want to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to do more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who want to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit must be determined by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in Shrewsbury, MO
A financial advisor in Shrewsbury, MO specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the knowledge to help you navigate the complexities of retirement planning and design a personalized approach that gets you where you want to go. A financial planner will assess where your finances currently are, adjust for your risk tolerance, and help you make sound decisions for yourself, both as employer and future retiree. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan that follows all IRS rules
- Arrange a trust plan for assets
- Create a record keeping system
- Help you understand 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 your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Shrewsbury, MO: Correct Capital's Process
Shrewsbury, MO business owners who don't have the time, desire, or knowledge to handle their self-employed retirement plan themselves can become burdened when looking at their options. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning on your behalf, and strive to make meeting the golden years of your dreams as easy as possible for you. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes 20 minutes for a member of our advisor team to understand if we're suitable for you and your business. This short introduction allows us to understand what you're looking for with no major time investment on your part.
- Gather Information — If we both decide to move forward, we'll request information, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to live. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and discuss the details of your plan to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've started to move forward, we'll put everything in place so you can start saving. Throughout our relationship, we'll meet with you and adjust your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and ethically obligated to do what's in your best interest. We are proud to provide straightforward communication and excellent service to help you reach your self-employed retirement goals.
Other services we offer in Shrewsbury, MO include:
Call Correct Capital for Your Shrewsbury, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Shrewsbury, MO financial advisors need to offer more than just sage financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver tailored self-employed retirement plans. We give all our Shrewsbury, MO clients the same I.O.U. promise: all of the advice we give you will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Shrewsbury, MO, call Correct Capital today at 877-930-4015 or contact us online.
