Self-employed retirement plans in St. Clair County, IL. The flexibility involved with having your own business in St. Clair County, IL is a wonderful advantage to being self-employed. But increased leeway can be accompanied by uncertainty, especially in when it comes to building a retirement plan, employer-sponsored plans aren't an option. Only 13% of self-employed individuals have retirement plans they can contribute to, but many would be wise to explore what plans are available. In addition to a more comfortable retirement, partnering with a financial advisor to set up your self-employed retirement plan in St. Clair County, IL offers tax benefits that can help you improve your bottom line.
Not many wealth management and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can read more about our story on our website). We know that your business and retirement goals transcend spreadsheets and percentages, and we are devoted to providing personalized plans that fit your goals. Read on to read more about your self-employed retirement plan options in St. Clair County, IL, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team today.
What Self-Employed Retirement Plans Are There?
There are many retirement savings plans that the self-employed can contribute to, and which is best for you depends on your unique situation. A St. Clair County, IL financial advisor can help you grasp the advantages and disadvantages of each option and choose the most suitable one for your circumstances. Typically, your self-employed retirement plan options in St. Clair County, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that provides individuals with tax advantages to save for retirement. If you deposit to a traditional IRA, contributions are typically tax-deductible, and any gains on investments grow tax-deferred, but withdrawals in retirement are liable to income tax. In contrast, Roth IRA deposits are made with money you've already paid taxes on, but qualified withdrawals 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, 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 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 exceed 25%. If you have employees, they must receive the same amount you do. You can either contribute either a fixed dollar sum or a percentage of wages to employee accounts. SEP IRAs may be a suitable self-employed retirement plan if your business goes 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 contributions are made with money you've yet to pay taxes on and withdrawals are taxed at your income at the time of withdrawal.
Eligibility: Any employer, including the self-employed, can establish a simplified employee pension plan.
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 based on 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 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 both an employer or employee with pre-tax money. This offers increased savings opportunities than some other retirement savings plans, however the possibility of greater retirement savings is often counterbalanced by more limited investment options. In an individual 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 business owners and their spouses have access to one-participant 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 a maximum 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 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 other types of retirement plans, a defined benefit plan doesn't fluctuate because of investment gains, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is ideal 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 withdrawals are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can establish an individual defined benefit plan, but it's typically only recommended for those over 50 who earn well into the six figures. Those interested in defined benefit plans tend to be:
- Partners or owners who want to contribute more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to contribute 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 didn't save as much
Contribution Limits: The contribution limit must be decided by an actuary who calculates for your income, age, and retirement goals. Contribution limits change every year.
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 indispensable for self-employed individuals. They have the expertise to help you navigate the complexities of retirement planning and implement a personalized approach that aligns with your goals. A financial advisor will look at where your finances currently are, understand your risk tolerance, and guide you in making informed 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 that follows all 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 guidance 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 want to invest the time, interest, and skill set to manage their own self-employed retirement plan can become stressed with the different options available to them. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning for you, and strive to make achieving the golden years of your dreams as easy as we possibly can. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — It only takes 20 minutes for one of our advisors to know if we're suitable for you and your business. This brief introduction allows us to get a feel for your needs with no obligation for you.
- Gather Information — If we seem like a good fit, we'll request 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 custom plan based entirely on type of advising you need.
- Review Your Plan — After we put together a plan based on the information you provide, 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 started to move forward, 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 monitor your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's in your best interest. We are proud to provide transparent communication and top-notch service to help you reach 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
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 offer more than just wise financial advice. Correct Capital enjoys getting to know our clients and their business to deliver personalized self-employed retirement plans. We offer all our St. Clair County, IL clients the same I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To get started on your self-employment retirement plan in St. Clair County, IL, call Correct Capital today at 877-930-4015 or contact us through our website.
