Self-employed retirement plans St. Paul, MN. The freedom of being your own boss in St. Paul, MN is one of the greatest advantages of being self-employed. However, this flexibility often comes with certain challenges, particularly in terms of planning for retirement, since you don't have the benefit of retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off exploring their options. In addition to having a financially stable retirement, working with a financial advisor in St. Paul, MN to establish your self-employed retirement plan offers significant tax advantages that help you to move your business forward.
Few St. Paul, MN financial advisory and retirement planning firms are as attuned to the requirements of self-employed individuals as well as Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and our firm take pride in supporting entrepreneurs with their retirement planning needs. We know that your goals for your business and retirement extend well past basic numbers, 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 call Correct Capital at 877-930-401k or contact us online to consult with a small business 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 provide immediate benefits today. With customizable contribution options to significant tax savings, partnering with a financial advisor in St. Paul, MN helps you customize your retirement plan to fit your individual circumstances.
Flexibility That Fits Your Income
When your earnings vary from year to year, a plan like a SEP IRA or Solo 401(k) provides the option to modify how much you save:
- Customizable Contributions: Contribute more during successful years and scale back when income is lower, ensuring your plan works with your current income.
- Roth Options: Choosing a Roth Solo 401(k) lets you settle taxes at the time of contribution, so you can withdraw without tax penalties in the future—a smart decision if you expect your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA reduce what you owe in taxes, helping you keep more of your earnings.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to grow.
- State-Specific Incentives: Depending on where you live, you may be eligible for state-specific tax breaks as a sole proprietor. These state-level incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 put into a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across different stocks, bonds, and other assets serves to mitigate financial risk while helping to grow your savings.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund helps you avoid dipping into savings during financial hardships and risking extra costs.
Plan for the Future of Your St. Paul, MN Business
A thoughtful retirement strategy enables you to plan ahead for what’s next with your St. Paul, MN business:
- Selling Your Business: When selling your business, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and don’t transfer with the business. These savings can provide the reliable income you’ll need during retirement. Remember that while selling your business results in a capital gain, retirement plan contributions are capped at annual limits (e.g., as much as $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, with catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings helps lower the taxes you are required to pay when you transfer your business.
- Succession Planning: For those winding down or handing over their business, your retirement accounts offer the funds you need through the transition. You may also partner with a financial advisor who specializes in succession planning and retirement accounts to minimize tax burdens associated with the transaction.
With the proper savings strategy, you can take control of your financial future, cut down your tax obligations, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in St. Paul, MN Now?
Time remains one of the most important assets for building your retirement fund. Getting a head start not only helps you grow a bigger financial cushion but also lowers the financial burden of saving aggressively in the future. The following are reasons why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement may cause a substantial impact on the total you’ll have when you stop working. The biggest reason is compound interest—the financial principle where your investments grow, and those returns, subsequently, accumulate even more returns. The greater time span your money has to grow, the greater the effect of this growth.
Example: Two individuals, Alex and Taylor 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 postpones starting contributions to age 40 but puts away $7,500 annually to bridge the gap.
By age 65, using a projected 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time can lead to substantial growth. Consider this example showing the impact of compound interest:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month yields only $235,412.97* by age 65—a shortfall of over $260,000, all because of a 10-year delay.
Starting sooner, the less effort required each year to reach your retirement goals.
*The figures provided in this example are estimates generated with NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. This information is for illustrative purposes only and do not guarantee future performance. Your individual results may differ based on factors such as market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in St. Paul, MN, it might seem easier to prioritize reinvesting in your business instead of saving for retirement. Even so, starting a plan now enables you to:
- Leverage growth that is tax-deferred or withdrawals without taxes later on.
- Benefit from contribution flexibility that adapt to your earnings.
- Create a long-term safety measure that offers peace of mind, no matter how your business changes.
The sooner you start, the less you’ll be required to worry about playing catch-up later in life. Building your retirement savings today means taking control of your financial future and creating for yourself the opportunity to focus on your goals—both for your future retirement and your St. Paul, MN business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for entrepreneurs in St. Paul, MN, each providing its own advantages and considerations. A financial advisor will guide you to evaluate the pros and cons of each option and determine the one most suitable for your unique situation. Typically, your self-employed retirement plan options in St. Paul, MN include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that offer specific tax advantages. In a standard IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but money taken out during retirement are subject to income tax. In contrast, with Roth IRAs, you contribute from post-tax earnings, but retirement withdrawals that qualify, including earnings, are exempt from taxes. In both types of accounts, withdrawals don’t incur penalties if you are at least 59½.
Eligibility: Unlike plans linked to your job, IRAs, including traditional and Roth options are available to anyone with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you're 50 or older.
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 sole proprietor, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, it's required to 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 may be ideal for companies with cycles of high revenue and low revenue. In contrast to some alternatives, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs operate like traditional IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
If you’re self-employed, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan meant for companies that have no employees or if the only employee is your spouse. These plans operate much like employer-sponsored 401(k) plans, and enable contributions as both an employer and an employee with pre-tax money. This allows for more savings versus SEPs or IRAs; however, the increased savings potential may be offset by more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses may establish and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you have the ability to make two types of contributions:
- Employee contributions of up to 100% of your earned income from self-employment, up to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your adjusted self-employment income, which is your net profit minus half of your self-employment tax and the deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 if you're over age 50 (for 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that delivers 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 strategy is recommended for wealthier professionals who are focused on saving a large amount for retirement and can commit to making sizeable contributions. Contributions offer tax-deferred growth, and withdrawals are taxable as income in retirement.
Eligibility: Self-employed professionals managing a one-person company or with a small staff of under five may establish an individual defined benefit plan, but it's typically suggested for individuals aged 50+ who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans tend to be:
- Entrepreneurs who want to invest more than $70,000 (or $77,500 if over age 50)
- Organizations that already put in 3-4% and are willing to do more
- Companies that have demonstrated consistent profit patterns
- Entrepreneurs over age 40 who aim to quickly build retirement savings or increase their retirement contributions rapidly
Contribution Limits: The contribution limit must be determined by an actuary based on your earnings, age, and retirement objectives. Limits on contributions 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 can be an essential partner for those working for themselves. They offer the knowledge to assist guide you through the challenges of retirement planning and craft a customized plan that reflects your aspirations. An expert in your area will assess where you stand financially, understand your risk tolerance, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you features:
- Assist in selecting a plan that best fits your needs and goals
- Further adapt the plan to your specific situation even further
- Create a written plan as required by IRS rules
- Organize a trust plan to manage your assets
- Ensure you comprehend the plan's terms
- Track and fine-tune your plan when necessary
- Offer continued financial education and guidance throughout your retirement planning process
- Boost your retirement earnings by optimizing your social security benefits
Self-Employed Retirement Plans in St. Paul, MN: Correct Capital's Process
St. Paul, MN business owners who aren’t equipped with the time or understanding to handle their retirement savings strategy independently can become overwhelmed when faced with their available plans. Through our team at Correct Capital, our St. Paul, MN financial advisors handle the bulk of your savings plan setup for you, to help make meeting your financial objectives as hassle-free as possible for you. We can help you get set up your self-employed retirement plan in a quick, four-step process:
- Schedule a Call: A quick 20-minute call is all it takes, a member of our advisor team will assess if we're suited to your needs for you and your business. This short conversation allows us to understand what you're looking for with no obligation or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including your employee count, your present financial standing, and your long-term savings targets. This allows us to put together a personalized strategy suited specifically for your needs.
- Review Your Plan: When we finalize a plan from the information you provide, we'll schedule a meeting and discuss your plan thoroughly to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can initiate your savings journey. Throughout our relationship, we'll have regular meetings and monitor your plan to keep it tailored to your evolving circumstances.
Our St. Paul, MN financial advisors and retirement plan consultants act 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:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in St. Paul, MN
To you, your business is more than "just a business", and your St. Paul, MN financial advisors must deliver more than just good financial guidance. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to deliver tailored self-employed retirement plans. We offer all our St. Paul, MN clients our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To begin on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
