Self-employed retirement plans in Swansea, IL. The freedom of running your own business in Swansea, IL is one of the great things about being self-employed. But more leeway can be accompanied by a lack of security, especially in when it comes to building a retirement plan, as you don't have access to any employer plans. Barely more than 10% of self-employed people have retirement plans they can contribute to, but many would be better off exploring their options. In addition to a more comfortable retirement, working with a financial advisor to set up your self-employed retirement plan in Swansea, IL offers tax benefits that can help drive you and your business forward.
Only a handful of financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners more than Correct Capital. Our founder's father was a small business owner himself (you can read more about our story here). We know that your business and retirement goals extend far beyond mere monetary figures, and we are devoted to providing personalized plans that reflect your goals. Read on to learn more about your self-employed retirement plan options in Swansea, IL, or call Correct Capital at 877-930-4015 or contact us online to speak to a small business financial advisor now.
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Types of Self-Employed Retirement Plans
There are several retirement savings options that the self-employed can establish, and which is best for you depends on your unique situation. A Swansea, IL financial advisor can help you grasp the advantages and disadvantages of each option and choose that works best for you. Typically, your self-employed retirement plan options in Swansea, IL are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are personal savings plans that offer specific tax advantages. If you deposit to a traditional IRA, deposits are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are subject to income tax. On the other hand, Roth IRA payments are made with after-tax income, but you pay no taxes on withdrawals or investment gains. In both a traditional an a Roth IRA, withdrawals can be made without extra fees if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through 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 percentage of of the money they make from their self-employment. Since you are self-employed, you (the employee) have a contribution limit of no more than the 25% already contributed by you (the employer). If you have employees, you must contribute an equal amount to their pensions. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be a good self-employed retirement plan if your business experiences periods of variable income. SEP IRAs don't have expensive initial setup or administrative charges other retirement plans do.
SEPs work like traditional IRAs, where deposits are made with money you haven't paid taxes on and distributions are taxed at your income at the time of withdrawal.
Eligibility: Self-employed individuals and any employer, can set up 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 based on a special 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 businesses with no employees or whose only employee is a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can make contributions as an employee and on your own behalf as the employer. This offers increased savings opportunities than some other retirement savings plans, however the possibility of greater retirement savings is often counteracted by more limited investment options. In a solo 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only self-employed individuals and their spouses can establish and contribute to a solo 401(k).
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) of 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 upon retirement. In contrast to the defined contribution plans mentioned above, a defined benefit plan doesn't oscillate based on investment gains, but allows self-employed people 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 large amount for retirement and want to add significant contributions. Contributions are tax deferred and contributions 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. Those interested in defined benefit plans tend to be:
- Partners or owners who desire 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 based on your income, age, and retirement goals. Contribution limits change each year.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Swansea, IL
A financial advisor in Swansea, IL specialized in self-employed retirement plans can be a crucial partner for self-employed individuals. They have the know-how to help you understand the complexities of retirement planning and design a tailored strategy that aligns with your goals. A financial planner will assess where your finances currently are, help you figure out your risk tolerance, and help you make smart decisions about saving and investing for retirement. Part of what we do for you includes:
- Help you pick 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 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 guidance into and through retirement
- Increase your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Swansea, IL: Correct Capital's Process
Swansea, IL business owners without the time, inclination, or knowledge to handle their self-employed retirement plan themselves can become burdened with the different plans available to them. At Correct Capital, our retirement consultants handle the lion's share of your retirement planning on your behalf, and strive to make achieving your business and retirement aspirations as simple as we possibly can. 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 a member of our advisor team to understand if we're a good fit for you and your business. This brief introduction lets us understand your needs with no obligation on your part.
- Gather Information — If we seem like a good fit, we'll request information, including how many employees you have (if any), your current financial situation, and your retirement goals. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and discuss 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 you can start saving. Throughout your time working with us, we'll meet with you 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 ethical obligation to do what's in your best interest. We pride ourselves in providing clear communication and excellent service to assist you reach your self-employed retirement goals.
Other services we offer in Swansea, IL include:
Call Correct Capital for Your Swansea, IL Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Swansea, IL financial advisors need to provide you with more than merely wise financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver customized self-employed retirement plans. We offer all our Swansea, IL clients our 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 Swansea, IL, speak to a member of our team today at 877-930-4015 or fill out our online form.
