Self-employed retirement plans in St. Louis County, MO. The freedom of having your own business in St. Louis County, MO is a fantastic aspect of being self-employed. But that freedom can come with uncertainty, especially in when it comes to saving for retirement, as you don't have access to any employer plans. Barely more than 10% of self-employed people have a workplace retirement plan, but many would be wise to look into what plans are available. In addition to setting you up for the retirement of your dreams, working with a financial advisor to get started and maintain your self-employed retirement plan in St. Louis County, MO offers significant tax advantages that can help free up much-needed funds for your business.
Few financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. Our founder's father was a small business owner himself (you can discover more about our story here). We know that your business and retirement goals go beyond figures and numbers, and we are dedicated to offering personalized plans that reflect where you are and where you want to go. Read on to read more about your self-employed retirement plan options in St. Louis County, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a small business financial advisor today.
Types of Self-Employed Retirement Plans
There are a few different retirement savings options that the self-employed can establish, each with its own set of advantages and considerations. A St. Louis County, MO financial advisor can help you understand the benefits and drawbacks of each option and choose the most suitable one for your specific needs. Generally, your self-employed retirement plan options in St. Louis County, 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 contributions are made with money you've already paid taxes on, but qualified distributions in retirement, including earnings, are tax-free. In both accounts, withdrawals can be made without penalty 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 portion of of the money they make from their self-employment. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, you would have to contribute the same amount for them as you do for yourself. You can either contribute either a fixed dollar sum or a percentage of annual income to employee accounts. SEP IRAs may be a suitable self-employed retirement plan if your business goes through cycles of high revenue and low revenue. SEP IRAs don't have the high upfront costs or administrative expenses often associated with other retirement plans.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and withdrawals are taxed at your income at the time of distribution.
Eligibility: Self-employed individuals and any employer, 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 maximum amount you can contribute in a given year 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 who only employ a spouse. Solo 401(k)s function in the same same way 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 possibility of greater retirement savings is often counteracted 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 advantages 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.
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 benefit to self-employed individuals once they've retired. In contrast to 401(k)s or IRAs, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed people to have an exact dollar figure as their income in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a large amount for retirement and want to make substantial contributions. Contributions are tax deferred and withdrawals 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 open 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 do more
- Companies who have demonstrated consistent 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.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in St. Louis County, MO
A financial advisor in St. Louis County, MO specialized in self-employed retirement plans can be a valuable asset for self-employed individuals. They have the knowledge to help you understand the intricacies of retirement planning and design a personalized approach that acts as a roadmap through your financial future. A financial planner will assess your financial situation, adjust for your risk tolerance, and guide you in making informed decisions for yourself, both as employer and future retiree. Part of what we do for you includes:
- Help you choose a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Adopt a written plan that follows all IRS guidelines
- Arrange a trust plan for assets
- Implement 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 you continue on the road to retirement
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in St. Louis County, MO: Correct Capital's Process
St. Louis County, MO 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 plans available to them. At Correct Capital, our retirement consultants handle the bulk of the retirement planning work for you, and strive to make meeting your retirement goals as simple as possible for you. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need a brief 20-minute call for a member of our advisor team to understand if we're the best firm to help you reach your goals. This short introduction lets us get a feel for what you're looking for with no major time investment for you.
- Gather Information — If we both decide to move forward, we'll request more info, including the number of employees in your business (if applicable), your current financial situation, and your retirement goals. This allows us to put together a custom plan suited specifically for your needs.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and go over the specifics of your plan to ensure it's what you were looking for.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so you can start saving. As long as we work together, we'll keep you up-to-date with how things are going and adjust your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and ethically bound to do what's in your best interest. We pride ourselves in providing transparent communication and excellent service to help you attain your self-employed retirement goals.
Other services we offer in St. Louis County, MO include:
Call Correct Capital for Your St. Louis County, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your St. Louis County, MO financial advisors need to offer more than merely sage financial advice. Correct Capital takes pride in getting to know our clients and what makes them and their business tick to deliver tailored self-employed retirement plans. We give all our St. Louis County, MO 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. Louis County, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
