Self-employed retirement plans Sioux Falls, SD. The independence of running your own company in Sioux Falls, SD is one of the best aspects of working for yourself. Even so, this freedom often comes with potential drawbacks, especially regarding building your retirement fund, since you don't have the benefit of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many could benefit from looking into other possibilities. In addition to having a financially stable retirement, seeking advice from a financial advisor in Sioux Falls, SD to create your self-employed retirement plan delivers significant tax advantages that allow both you and your business to thrive.
Few Sioux Falls, SD investment consulting and retirement planning firms are as attuned to the requirements of small business owners better than 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 have a rich history of assisting business owners in their retirement planning needs. We recognize that your business and retirement aspirations aren’t limited to simple financial figures, and we strive to offer customized solutions that reflect your objectives. Read on to discover about your self-employed retirement plan options in Sioux Falls, SD, or call Correct Capital at 877-930-401k or contact us online to talk to a small business financial advisor in Sioux Falls, SD today.
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Why Sioux Falls, SD 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 tangible benefits today. From flexible contributions to significant tax savings, working with a financial advisor in Sioux Falls, SD enables you to design your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) gives you the freedom to adjust how much you save:
- Customizable Contributions: Save extra during high-income years and scale back when your earnings dip, ensuring your plan works with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw your savings tax-free down the road—a wise move if you anticipate your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed provide powerful 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: Your savings grow untaxed until withdrawn, which gives your money more time to accumulate.
- State-Specific Incentives: Based on your location, you may be eligible for state-specific tax breaks as a sole proprietor. These local incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements can take advantage of 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
Creating a stable future goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Spreading your investments across varied stocks, bonds, and alternatives 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 ensures you don’t dipping into savings during challenging periods and risking extra costs.
Plan for the Future of Your Sioux Falls, SD Business
Preparing for retirement can assist you prepare for what’s next with your Sioux Falls, SD business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and are not part of the sale. These plans can provide the financial stability you’ll need later on. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are restricted by contribution limits (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, factoring in catch-up contributions, depending on plan details).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you are required to pay when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts provide financial security during the change. You can also work with a financial advisor experienced in both succession and retirement strategies to reduce taxes on the sale.
With the best-fit retirement strategy, 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 Sioux Falls, SD Now?
There’s no denying that time is one of the most crucial assets when it comes to saving for retirement. Beginning sooner rather than later not only helps you grow a bigger financial cushion but also reduces the financial burden of saving aggressively in the future. Here’s why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings could lead to a significant impact on the amount you’ll have when you retire. The primary reason is compound interest—the concept where your investments generate earnings, and those returns, subsequently, generate even more returns. The greater time span your money has to grow, the more significant the impact of this compounding process.
Example: Two individuals, Alex and Taylor are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily can lead to impressive growth. Here’s a simple scenario showing the power of consistent growth:
- Starting at age 25: If you invest $200 per month in a retirement plan with an projected return of 7%, you’ll grow to approximately $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, just from a 10-year delay.
The earlier you begin, the less effort required each year to meet your retirement goals.
*The numbers shown in this scenario are estimates generated with NerdWallet’s Compound Interest Calculator, based on a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are meant to provide general guidance and are not a promise of future results. Your individual results may differ due to factors such as market conditions, fees, and your unique situation. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Sioux Falls, SD, it might seem easier to prioritize reinvesting in your business instead of saving for retirement. However, beginning a plan now gives you the chance to:
- Take advantage of growth that is tax-deferred or tax-free withdrawals down the road.
- Take advantage of adjustable savings that adapt to your earnings.
- Build a financial cushion that offers peace of mind, no matter how your business evolves.
Starting early, the less you’ll need to worry about playing catch-up later in life. Saving for retirement now means managing your financial future and allowing yourself the opportunity to focus on your dreams—both for your future retirement and your Sioux Falls, SD business.
Types of Self-Employed Retirement Plans
There are several retirement savings options available for entrepreneurs in Sioux Falls, SD, each providing its own advantages and considerations. A financial advisor is available to help you understand the pros and cons of each plan and choose the one ideal for your circumstances. In most cases, your self-employed retirement plan options in Sioux Falls, SD include:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that provide key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and investment earnings grow tax-deferred, but money taken out during retirement are subject to income tax. In contrast, Roth IRAs require contributions from post-tax earnings, but retirement withdrawals that qualify, including earnings, are exempt from taxes. In both types of accounts, withdrawals are penalty-free as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are available to anyone with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA is a retirement plan that allows self-employed individuals to save a percentage of their net business profits. Contributions are strictly employer contributions an employer, so, as a independent business owner, you (the employee) cannot make additional contributions 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 may choose to contribute a set monetary value or a percentage of wages to employee accounts. SEP IRAs works well for companies with 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 operate like standard IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Both employers and self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for companies that have no employees or where the only employee is a spouse. This type of plan are similar to standard 401(k) plans, and allow you to contribute as both an employer and an employee with pre-tax money. This allows for more savings versus SEPs or IRAs; however, the increased savings potential may be offset by more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which offer 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: As a self-employed individual with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, subject to the annual contribution limit. In 2025, those limits are $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your adjusted self-employment income, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that provides a set amount to self-employed individuals upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know exactly how much they'll have in retirement. This plan is best suited for higher-income self-employed individuals who aim to accumulate a large amount for retirement and are willing to make sizeable contributions. Contributions offer tax-deferred growth, and withdrawals are taxed as income upon retirement.
Eligibility: Any self-employed individual running an owner-only business or with less than five employees may establish an individual defined benefit plan, but it's typically suggested for individuals aged 50+ who earn at least $250,000 a year. Generally, good candidates for defined benefit plans tend to be:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 for individuals 50 and older)
- Companies already contributing 3-4% but are open to increasing contributions
- Organizations showing consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The contribution limit must be determined by an actuary using your earnings, age, and retirement objectives. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Sioux Falls, SD for Your Self-Employed Retirement Plan
Partnering with an advisor in Sioux Falls, SD specialized in self-employed retirement plans is an invaluable resource for those working for themselves. They have the expertise to help guide you through the challenges of retirement planning and develop a personalized approach that matches your objectives. Your advisor in Sioux Falls, SD will evaluate your financial situation, understand your risk tolerance, and help you in choosing wisely about saving and investing for retirement. Included in what we do for you involves:
- Help you choose a plan that aligns with your objectives and circumstances
- Customize the plan to your needs even further
- Formalize a plan in writing as required by IRS rules
- Organize a trust plan to manage your assets
- Help you understand the plan's terms
- Monitor and adjust your plan when necessary
- Deliver continuous support and financial insights as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Sioux Falls, SD: Correct Capital's Process
Sioux Falls, SD business owners who aren’t equipped with the time or understanding to manage their retirement savings strategy themselves can become overwhelmed when faced with their available plans. Through our team at Correct Capital, our Sioux Falls, SD financial advisors handle the bulk of your retirement planning for you, and strive to ensure meeting your financial objectives 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: In just 20 minutes, a member of our advisor team will assess if we're a good fit for you and your business. This initial call helps us understand what you're looking for with no obligation or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll request information, including how many employees you have (if any), your existing financial picture, and your future objectives. This helps us create a custom plan that aligns with your goals.
- Review Your Plan: After we put together a plan from the information you provide, we'll sit down with you and go over your plan step by step to make sure it's clear and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll implement the necessary steps so you can start saving. Throughout our relationship, we'll meet with you and review your strategy to make sure it remains aligned with your goals.
Our Sioux Falls, SD financial advisors and retirement plan consultants are 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 Sioux Falls, SD 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 Sioux Falls, SD
Your business isn't "just a business" to you, and your Sioux Falls, SD financial advisors should provide more than simply sound financial advice. At Correct Capital, we make it a priority to understand our clients and their businesses to deliver tailored self-employed retirement plans. We offer all our Sioux Falls, SD clients our I.O.U. promise: everything we recommend 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.
