Self-employed retirement plans in St. Clair County, IL. The flexibility involved with running your own business in St. Clair County, IL is a wonderful advantage to working for yourself. But increased leeway can come with limited stability, particularly in terms of saving for retirement, employer-sponsored plans aren't an option. Only a fraction of self-employed individuals have retirement plans they can contribute to, but many would be better off exploring their options. In addition to setting you up for the retirement of your dreams, partnering with a financial advisor to get started and maintain your self-employed retirement plan in St. Clair County, IL offers favorable tax incentives 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. In fact, we were inspired by a small business owner, our founder's father (you can learn more about our story on our website). We know that your business and retirement aspirations go beyond figures and numbers, and we are committed to providing customized solutions that fit your goals. Read on to discover more about your self-employed retirement plan options in St. Clair County, IL, or call Correct Capital at 314-930-401(k) or contact us online 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 contribute to, each with its own set of advantages and considerations. A St. Clair County, IL financial advisor can help you understand the advantages and disadvantages of each option and opt for that works best for you. Generally, your self-employed retirement plan options in St. Clair County, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are investment accounts that provides individuals with tax advantages to save for retirement. If you deposit to a traditional IRA, contributions are deducted from your taxable income, and any gains on investments grow tax-deferred, but withdrawals in retirement are taxed as regular income. In contrast, Roth IRA deposits are made with money you've already paid taxes on, but qualified distributions in retirement, including earnings, are tax-free. In both accounts, distributions are penalty-free if 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 share of of the money they make from their 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 fixed dollar sum or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan for businesses that go through cycles of high revenue and low revenue. SEP IRAs don't have the costly startup or administrative fees often associated with other retirement plans.
SEPs work like traditional IRAs, where payments are made with pre-tax money and distributions are taxed as income.
Eligibility: Any employer, including the self-employed, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
- $66,000
For self-employed people, the amount eligible to be contributed is decided by a unique calculation.
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 more savings than SEPs or IRAs, however the additional opportunities for saving are often counteracted by having less investment options available. In a one-participant 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax benefits as their IRA contribution counterparts.
Eligibility: Only sole proprietors and their spouses have access to solo 401(k)s.
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 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.
The total contribution 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 offers a a fixed monthly figure to self-employed individuals once they've retired. In contrast to the defined contribution plans mentioned above, a defined benefit plan doesn't fluctuate based on investment gains, but allows self-employed people 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 want to add substantial 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 establish an individual defined benefit plan, but it's typically not a great idea unless you're over 50 and earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who want to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to contribute more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is determined by an actuary who calculates for your income, age, and retirement goals. Contribution limits are adjusted annually.
How a Financial Advisor Can Help Guide Your Self-Employed Retirement Plan in St. Clair County, IL
A financial advisor in St. Clair County, IL specialized in self-employed retirement plans can be an invaluable resource for self-employed individuals. They have the expertise to help you navigate the intricacies of retirement planning and create a personalized approach that gets you where you want to go. A financial planner will evaluate where your finances currently are, understand your risk tolerance, and guide you in making informed decisions about your financial future. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Personalize 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 support into and through retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in St. Clair County, IL: Correct Capital's Process
St. Clair County, IL business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become overwhelmed with the different options available to them. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work on your behalf, and endeavor to make achieving your retirement goals 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 — We only need 20 minutes for one of our advisors to know if we're the best firm to help you reach your goals. This brief introduction lets us understand your needs with no major time investment for you.
- Gather Information — If we both decide to move forward, we'll ask for more info, including the number of employees in your business (if applicable), your current finances, and your retirement goals. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over your plan in detail to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so your savings can start growing immediately. As long as we work together, we'll keep you up-to-date with how things are going and adjust your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and ethical obligation to do what's best for you and only you. We are proud to provide straightforward communication and top-notch service to help you attain your self-employed retirement goals.
Other services we offer in St. Clair County, IL include:
- Succession Planning
- 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
Call Correct Capital for Your St. Clair County, IL Self-Employed Retirement Plan
Your business isn't simply an enterprise to you, and your St. Clair County, IL financial advisors need to provide you with more than merely sound 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 give all our St. Clair County, IL clients our 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. Clair County, IL, speak to a member of our team today at 314-930-401(k) or contact us through our website.
