Self-employed retirement plans St. Paul, MN. The flexibility of running your own company in St. Paul, MN is one of the best aspects of working for yourself. That said, this freedom can come with a lack of security, especially when it comes to retirement savings, because you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider looking into other possibilities. In addition to having a financially stable retirement, partnering with a financial advisor in St. Paul, MN to establish your self-employed retirement plan delivers significant tax advantages that allow you to move your business forward.
Few St. Paul, MN wealth management and retirement planning firms truly grasp the challenges faced by entrepreneurs as well as Correct Capital. Our founder's father was a small business owner himself (read more of our story here), and our firm have a rich history of helping businesses with their retirement planning needs. We know that your professional and personal aspirations go far beyond simple financial figures, and we are dedicated to offer customized solutions to meet your unique goals. Read on to discover about your self-employed retirement plan options in St. Paul, MN, or reach out to Correct Capital at 877-930-401k or contact us online to speak with a self-employed financial advisor in St. Paul, MN today.
Why St. Paul, MN Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also deliver immediate benefits today. With customizable contribution options to substantial tax savings, working with a financial advisor in St. Paul, MN enables you to design your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) gives you the freedom to modify how much you save:
- Customizable Contributions: Save extra during high-income years and cut back when income is lower, so your plan works with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw tax-free later—a smart decision if you expect your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed provide valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SIMPLE IRA shrink your tax liability, allowing you to keep more of your earnings.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, giving your money more time to grow.
- State-Specific Incentives: Depending on where you live, you might access extra tax breaks as a business owner. These regional incentives make these plans even more advantageous.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can take advantage of a credit of up to 50% of the first $2,000 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Spreading your investments across a mix of stocks, bonds, and alternatives serves to mitigate financial risk while helping to grow your savings.
- Emergency Back-Up: Supplementing your retirement savings with a business emergency fund prevents you from dipping into savings during tough times and risking extra costs.
Plan for the Future of Your St. Paul, MN Business
Preparing for retirement also helps you prepare for what’s next with your St. Paul, MN business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and don’t transfer with the business. These savings ensure the steady income you’ll need later on. It’s important to note that while the sale of a business usually creates a capital gain, contributions to retirement accounts are capped at annual limits (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you’ll owe when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts provide a stable foundation as you make this shift. You might want to partner with a financial advisor who specializes in succession planning and retirement accounts to reduce taxes associated with the transaction.
With the best-fit retirement strategy, you manage your financial future, cut down your tax obligations, and establish a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in St. Paul, MN Now?
There’s no denying that time is one of the most important resources when it comes to saving for retirement. Getting a head start not only lets you accumulate a larger nest egg but also minimizes the stress of catching up later in life. The following are reasons why it pays to take action now:
The Cost of Waiting
Delaying your retirement savings could lead to a significant impact on the total you’ll have when you reach retirement age. The biggest reason is compound interest—the powerful process where your investments earn returns, and those returns, then, accumulate even more returns. The longer your money has to grow, the greater the impact of this compounding process.
Example: Taylor and Alex are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to bridge the gap.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Regular, modest investments made consistently may result in significant growth. Consider this example showing the impact of compounding:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
The earlier you begin, the less you need to save each year to meet your retirement goals.
*The figures provided in this example are estimates derived from NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are intended as illustrative examples and are not a promise of future results. Actual results may vary based on elements like market conditions, fees, and individual circumstances. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
If you’re self-employed in St. Paul, MN, it is often the case that you focus more on reinvesting in your business instead of saving for retirement. That said, starting a plan now enables you to:
- Take advantage of growth that is tax-deferred or tax-free withdrawals in the future.
- Enjoy flexible contributions that align with your cash flow.
- Build a long-term safety measure that offers peace of mind, no matter how your business evolves.
Getting started now, the less you’ll be required to worry about making up for lost time later in life. Saving for retirement now means managing your financial future and giving yourself the opportunity to turn your attention to your goals—both for your future retirement and your St. Paul, MN business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for self-employed individuals in St. Paul, MN, each offering its own advantages and considerations. A financial advisor can help you understand the benefits and drawbacks of each plan and identify the one best suited for your circumstances. In most cases, your self-employed retirement plan options in St. Paul, MN consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that offer specific tax advantages. In a traditional IRA, contributions are typically tax-deductible, and returns grow free of current taxes, but money taken out during retirement are taxed as income. In contrast, Roth IRA contributions from post-tax earnings, but qualified withdrawals in retirement, including earnings, are not taxed. In both accounts, withdrawals come without penalties as long as you are at least 59½.
Eligibility: Unlike plans linked to your job, traditional and Roth IRAs are accessible for individuals with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA serves as a retirement savings option that permits self-employed individuals to contribute a percentage of their net earnings. Contributions must come from an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions more than the 25% you (the employer) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. It's your choice whether to contribute a set monetary value or a percentage of wages to employee accounts. SEP IRAs is a good option for entrepreneurs facing periods of inconsistent earnings. Unlike other plans, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs function like conventional IRAs, where the contributions are tax-deferred and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for companies that have no employees or when the sole employee is your spouse. These plans function similarly to employer-sponsored 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This allows for more savings than SEPs or IRAs; however, the additional opportunities often come with more limited investment options. Using a solo 401(k), you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you are allowed to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your earned income from self-employment, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 for individuals aged 60-63 in 2025.
- Profit-sharing contributions (as an employer) are limited 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.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that provides a set amount to business owners upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but enables participants to determine exactly how much they'll receive in retirement. This plan is recommended for wealthier professionals who aim to accumulate a substantial amount for retirement and are prepared to contribute substantial contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income in retirement.
Eligibility: Any self-employed individual running an owner-only business or with a small staff of under five may establish an individual defined benefit plan, but it's typically recommended for those over 50 who earn at least $250,000 a year. Typically, good candidates for defined benefit plans tend to be:
- Business owners or partners who want to invest more than $70,000 (or $77,500 for those aged 50+)
- Businesses currently investing 3-4% with plans to contribute more
- Businesses with proven consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The maximum allowable contribution requires calculation from an actuary based on your financial situation, age, and savings targets. Contribution limits change annually.
The Importance of a Financial Advisor in St. Paul, MN for Your Self-Employed Retirement Plan
Partnering with an advisor in St. Paul, MN focused on self-employed retirement strategies serves as an invaluable resource for those working for themselves. They have the expertise to help understand the intricacies of saving for retirement and craft a personalized approach that matches your objectives. Your advisor in St. Paul, MN will review your finances, determine how much risk you’re comfortable with, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you includes:
- Guide you in choosing a plan that best fits your needs and goals
- Further adapt the plan to your needs even further
- Formalize a plan in writing that complies with IRS regulations
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Track and fine-tune your plan as needed
- Deliver continuous support and financial insights as you continue on the road to retirement
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in St. Paul, MN: Correct Capital's Process
Self-employed individuals in St. Paul, MN who aren’t equipped with the time or understanding to manage their retirement savings strategy themselves often feel overwhelmed by their choices. Through our team at Correct Capital, our St. Paul, MN financial advisors handle the lion's share of your savings plan setup for you, working to make meeting your retirement goals as hassle-free as possible for you. We are here to assist you in setting up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: In just 20 minutes, a member of our advisor team can help understand if our services align for you and your business. This initial call lets us learn about your needs with no pressure or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll request information, including your employee count, your current financial situation, and your retirement goals. This allows us to put together a custom plan that aligns with your goals.
- Review Your Plan: After we put together a plan based on the information you provide, we'll schedule a meeting and go over your plan thoroughly to help you fully grasp it and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll put everything in place so you can begin contributing. Throughout our relationship, we'll meet with you and monitor your plan to ensure it stays suited to your needs.
Our St. Paul, MN financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in St. Paul, MN include:
- Retirement Financial Planning
- Independent Financial Advisor
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
Call Correct Capital for Your Self-Employed Retirement Plan in St. Paul, MN
You don't see your business as "just a business", and your St. Paul, MN financial advisors should provide more than basic financial recommendations. With Correct Capital, we focus on building a relationship with our clients and their businesses to create tailored self-employed retirement plans. We offer all our St. Paul, MN clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
