Self-employed retirement plans Sioux Falls, SD. The independence of being your own boss in Sioux Falls, SD is one of the best aspects of having a self-directed career. Even so, this freedom sometimes brings with potential drawbacks, particularly regarding planning for retirement, as you don't have the benefit of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider looking into other possibilities. In addition to having a more comfortable retirement, seeking advice from a financial advisor in Sioux Falls, SD to create your self-employed retirement plan offers significant tax advantages that enable you to move your business forward.
Few Sioux Falls, SD financial advisory 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 (check out our story here), and we take pride in helping businesses with their retirement planning needs. We recognize that your professional and personal aspirations extend well past just monetary concerns, and we are dedicated to create tailored solutions that reflect your objectives. Continue exploring to find out 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.
Why Sioux Falls, SD Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide real benefits today. From flexible contributions to considerable tax savings, working with a financial advisor in Sioux Falls, SD helps you create your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) offers the option to tailor how much you save:
- Customizable Contributions: Save extra during successful years and scale back when revenues are down, so your plan works with your cash flow.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, allowing you to withdraw without tax penalties in the future—an advantageous choice if you believe your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer significant tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, allowing you to keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to compound.
- State-Specific Incentives: Based on your location, you may be eligible for extra deductions as a business owner. These regional incentives can make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Those who meet the requirements 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
Building a secure retirement isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and other assets is a smart way to minimize exposure to risk while helping to grow your savings.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business prevents you from dipping into savings during challenging periods and incurring penalties.
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: If you’re planning to sell, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and are not part of the sale. These plans offer the steady income you’ll need during retirement. It’s important to note that while selling your business results in a capital gain, deposits into these plans are restricted by contribution limits (e.g., up to $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely helps lower the taxes you are required to pay when you sell your business.
- Succession Planning: Whether you’re transferring ownership, your retirement accounts offer financial security through the transition. You can also seek advice from a financial advisor experienced in both succession and retirement strategies to reduce taxes associated with the transaction.
With the proper savings strategy, you gain control over your financial future, lower your tax bill, 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?
Time remains one of the most valuable assets in retirement planning. Beginning sooner rather than later not only helps you grow a bigger financial cushion but also lowers the pressure of playing catch-up as you get older. Here’s why it pays to take action now:
The Cost of Waiting
Delaying your retirement savings may cause a major impact on the amount you’ll have when you stop working. The primary reason is compound interest—the financial principle where your investments generate earnings, and those returns, then, accumulate even more returns. The greater time span your money has to grow, the larger the effect of this compounding process.
Example: Alex and Taylor are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but contributes $7,500 annually to make up for lost time.
By age 65, using a projected 7% annual return:
- Alex invests $180,000 and accumulates $691,184.39*.
- Taylor puts in $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently can lead to substantial growth. Consider this example showing the effect of compounding:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, simply due to a 10-year delay.
Starting sooner, the less you need to save each year to reach your retirement goals.
*The numbers shown in this scenario represent estimates calculated using NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. These examples are meant to provide general guidance and do not guarantee future performance. Your individual results may differ based on variables including market conditions, fees, and individual circumstances. Be sure to speak with a financial advisor for custom recommendations.
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 over saving for retirement. That said, beginning a plan now enables you to:
- Benefit from tax-deferred growth or tax-free withdrawals down the road.
- Take advantage of contribution flexibility that change with your cash flow.
- Establish a safety net that offers peace of mind, no matter how your business evolves.
Starting early, the less you’ll have to worry about catching up later in life. Taking steps toward your retirement goals today means gaining control over your financial future and allowing yourself the freedom to concentrate on your goals—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 can help you understand the pros and cons of each choice and identify the one ideal for your circumstances. Typically, your self-employed retirement plan options in Sioux Falls, SD are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that offer specific tax advantages. In a traditional IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but money taken out during retirement are taxable. In contrast, with Roth IRAs, you contribute are made with after-tax income, but eligible distributions during retirement, including earnings, are exempt from taxes. In both types of accounts, withdrawals are penalty-free if you are at least 59½.
Eligibility: Unlike plans linked to your job, both traditional and Roth IRAs are available to anyone with a source of 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 offers a way to save for retirement that allows those who are self-employed to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a sole proprietor, you (the employee) would not be able to contribute more than the 25% you (the employer) allocate. If you have employees, it's required to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a set monetary value or a percentage of wages to employee accounts. This type of plan may be ideal for businesses that experience fluctuating revenue streams. Unlike other plans, SEP IRAs are free of costly startup or administrative fees.
SEPs operate like traditional IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals 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 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 self-employed retirement plan meant for businesses with no employees or if the only 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 employer and an employee with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the extra savings options can be balanced 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: Solo 401(k)s are available solely to business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you have the ability to make two types of contributions:
- Deferrals as an employee of up to 100% of your self-employment income, capped at the annual contribution limit. In 2025, those limits are $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 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.
Your combined contributions must not surpass $70,000, or $77,500 for those aged 50 and older (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans represents a type of retirement plan that guarantees a pre-established payout to entrepreneurs upon retirement. In contrast to the plans discussed earlier, investment returns don’t affect the payout, but allows self-employed individuals to know the precise amount they'll receive in retirement. This plan is recommended for wealthier self-employed individuals who want to save a large amount for retirement and are willing to make substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income in retirement.
Eligibility: Self-employed professionals operating a solo business or with less than five employees may establish an individual defined benefit plan, but it's generally recommended for people above age 50 who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans tend to be:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% with plans to contribute more
- Companies showing consistent profit patterns
- Business leaders over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The contribution limit must be determined by an actuary based on your financial situation, age, and savings targets. Contribution limits change annually.
The Importance of a Financial Advisor in Sioux Falls, SD for Your Self-Employed Retirement Plan
A financial advisor in Sioux Falls, SD specialized in self-employed retirement plans is an essential partner for those working for themselves. They bring the skills needed to navigate the complexities of retirement planning and develop a personalized approach that aligns with your goals. Your advisor in Sioux Falls, SD will evaluate your financial situation, understand your risk tolerance, and assist you in making informed decisions about saving and investing for retirement. Included in what we do for you includes:
- Guide you in choosing a plan that suits your unique requirements
- Further adapt the plan to your specific situation even further
- Create a written plan as required by IRS rules
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Review and modify your plan when necessary
- Offer continued financial education and guidance to help you navigate your retirement journey
- Maximize what you receive in retirement by optimizing your social security benefits
Self-Employed Retirement Plans in Sioux Falls, SD: Correct Capital's Process
Sioux Falls, SD business owners who lack the time, interest, or knowledge to manage their retirement savings strategy independently can become overwhelmed when faced with their options. At Correct Capital, our Sioux Falls, SD financial advisors handle the majority of your retirement strategy for you, and strive to ensure meeting your retirement goals as hassle-free as possible for you. We can help you get set up your self-employed retirement plan in just four steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team will assess if we're suited to your needs for you and your business. This initial call allows us to get a sense of your goals with no obligation or significant effort on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including your employee count, your current financial situation, and your future objectives. This allows us to put together a personalized strategy that aligns with your goals.
- Review Your Plan: When we finalize a plan from the information you provide, we'll sit down with you and go over your plan in detail to make sure it's clear and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll put everything in place so you can initiate your savings journey. Throughout our relationship, we'll check in and review your strategy to keep it tailored to your evolving circumstances.
Our Sioux Falls, SD financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in Sioux Falls, SD include:
- 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
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Sioux Falls, SD
To you, your business is more than "just a business", and your Sioux Falls, SD financial advisors should provide more than basic financial recommendations. With Correct Capital, we make it a priority to understand our clients and their businesses to create tailored self-employed retirement plans. To every client in Sioux Falls, SD, we provide 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.
