Self-employed retirement plans in St. Charles, MO. The flexibility involved with running your own business in St. Charles, MO is a wonderful advantage to working for yourself. But more leeway can come with limited stability, especially in when it comes to building a retirement plan, as you don't have access to any employer plans. Barely more than 10% of self-employed people have retirement plans they save with, but many would be wise to explore what plans are available. In addition to setting you up for the golden years of your dreams, working with a financial advisor to get started and maintain your self-employed retirement plan in St. Charles, MO offers tax benefits that can help free up much-needed funds for your business.
Only a handful of wealth management and retirement planning firms will understand the needs of the self-employed and small business owners as well as Correct Capital. Our founder's father was a small business owner himself (you can read more about our story here). We know that your business and retirement aspirations extend far beyond spreadsheets and percentages, and we are dedicated to offering customized solutions that fit your goals. Read on to discover more about your self-employed retirement plan options in St. Charles, MO, or call Correct Capital at 314-930-401(k) or fill out our online form to speak to a small business financial advisor today.
What Self-Employed Retirement Plans Are There?
There are a few different retirement savings plans that the self-employed can set up, each with its own set of advantages and considerations. A St. Charles, MO financial advisor can help you grasp the pros and cons of each option and choose that works best for you. Typically, your self-employed retirement plan options in St. Charles, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that offer specific tax advantages. In a traditional IRA, contributions are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are taxed as if it were income. On the other hand, Roth IRA deposits 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, distributions are penalty-free 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 available to anyone with an earned income.
Contribution Limits: For 2023, the maximum yearly contributions 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 percentage of of the money they make from their self-employment. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 25%. If you have employees, you must contribute an equal amount to their pensions. You may choose to contribute either a predetermined fixed dollar amount or a proportion of annual income to employee accounts. SEP IRAs may be an excellent self-employed retirement plan if your business goes through fluctuating income periods. SEP IRAs don't have the high upfront costs or administrative expenses other retirement plans do.
SEPs work like traditional IRAs, where contributions are made with money you've yet to pay taxes on and distributions are taxed at your income at the time of withdrawal.
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
For self-employed people, the maximum amount you can contribute in a given year is decided by a specific formula.
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 who only employ a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers more savings than SEPs or IRAs, however the additional opportunities for saving are often counteracted by more limited investment options. In a one-participant 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 business owners 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) which cannot exceed up to 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 once they've retired. As opposed to the defined contribution plans mentioned above, a defined benefit plan doesn't oscillate because of investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a significant sum for retirement and are willing to make significant contributions. Contributions are tax deferred and contributions are taxed as income in retirement.
Eligibility: Any self-employed individual who runs a business with no employees besides the owner or has less than five employees can establish an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and 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 contribute more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit must be calculated by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in St. Charles, MO
A financial advisor in St. Charles, MO specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the know-how to help you understand the intricacies of retirement planning and implement a tailored strategy that acts as a roadmap through your financial future. A financial advisor will analyze your financial situation, help you figure out your risk tolerance, and help you make smart decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan in accordance with IRS guidelines
- 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 support as long as you work with us
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in St. Charles, MO: Correct Capital's Process
St. Charles, MO business owners without the time, desire, or knowledge to handle their self-employed retirement plan themselves can become stressed with the different plans available to them. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning on your behalf, and endeavor to make meeting the golden years of your dreams as easy as possible for you. We can help you get set up with your self-employed retirement plan in four simple steps:
- Schedule a Call — It only takes 20 minutes for one of our advisors to understand if we're the best firm to help you reach your goals. This brief introduction allows us to understand your needs with no major time investment for you.
- Gather Information — If we both decide to move forward, we'll ask for information, including how many employees you have (if any), your current finances, 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 — Once we've compiled your plan, we'll meet with you and go over the specifics of your plan to ensure you understand it.
- Implementation and Monitoring — Once we've enacted your plan, we'll put everything in place so you can start saving. As long as we work together, 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 morally bound to do what's in your best interest. We pride ourselves in providing transparent communication and high-quality service to help you reach your self-employed retirement goals.
Other services we offer in St. Charles, MO include:
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
Call Correct Capital for Your St. Charles, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your St. Charles, MO financial advisors need to provide you with more than simply sage financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver personalized self-employed retirement plans. We offer all our St. Charles, 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 St. Charles, MO, call Correct Capital today at 314-930-401(k) or contact us online.