Self-employed retirement plans in Swansea, IL. The freedom of running your own business in Swansea, IL is a fantastic aspect of being self-employed. But that freedom can be accompanied by limited stability, particularly in when it comes to saving for retirement, you don't have an employer who will set up a plan for you. Only a fraction of self-employed individuals have retirement plans they save with, but many would be wise to look into what plans are available. In addition to a more comfortable retirement, working with a financial advisor to set up your self-employed retirement plan in Swansea, IL offers favorable tax incentives that can help propel you and your business towards success.
Only a handful of financial advisory and retirement planning firms know what it's like to be self-employed or a small business owner as well as Correct Capital. In fact, we were inspired by a small business owner, our founder's father (you can discover more about our story here). We have a deep understanding that your business and retirement aspirations transcend just profit, and we are dedicated to providing customized plans that fit where you are and where you want to go. Continue reading to discover more about your self-employed retirement plan options in Swansea, IL, or call Correct Capital at 314-930-401(k) or contact us online to speak to a member of our advisory team at your convenience.
Types of Self-Employed Retirement Plans
There are many retirement savings plans available for self-employed individuals, and which is best for you depends on your unique situation. A Swansea, IL financial advisor can help you grasp the benefits and drawbacks of each option and opt for that works best for you. Typically, your self-employed retirement plan options in Swansea, IL include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are long-term savings plans that offer specific tax advantages. If you deposit to a traditional IRA, contributions are deducted from your taxable income, and investment earnings grow tax-deferred, but distributions in retirement are liable to income tax. On the other hand, Roth IRA deposits are made with money you've already paid taxes on, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, distributions are penalty-free as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through employment, traditional and Roth IRAs can be set up by 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 percentage 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 may choose to contribute either a predetermined fixed dollar amount or a proportion of annual income to employee accounts. SEP IRAs may be a good 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 deposits are made with money you've yet to pay taxes on and distributions are taxed as income.
Eligibility: Any employer, including the self-employed, can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
For the self-employed individual, the maximum amount you can contribute in a given year is decided by a unique calculation.
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 work about the same 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 additional opportunities for saving are often counteracted by having less investment options available. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each feature the same tax benefits as their IRA contribution counterparts.
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 up 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.
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 offers a a fixed benefit to self-employed individuals after they've left the workforce. In contrast to 401(k)s or IRAs, a defined benefit plan doesn't oscillate based on investment returns, but allows self-employed individuals to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and want to add substantial 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 well-suited for those over 50 who earn at least $250,000 a year. 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 have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to make up for earlier years when they couldn't save as much
Contribution Limits: The contribution limit is determined by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
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 valuable asset for self-employed individuals. They have the know-how to help you navigate the complexities of retirement planning and create a tailored strategy that acts as a roadmap through your financial future. A financial planner will look at your financial situation, adjust for 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 pick a plan that best fits your needs and goals
- Customize the plan to your needs even further
- Adopt a written plan in accordance with 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 maximizing 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 stressed with the different plans available to them. At Correct Capital, our financial advisors handle the bulk of the retirement planning work on your behalf, and strive to make meeting your business and retirement goals as easy 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 20 minutes for a member of our advisor team to know if we're a good fit for you and your business. This short introduction allows us to get a feel for what you're looking for with no major time investment for you.
- Gather Information — If we seem like a good fit, we'll request more info, including the number of employees in your business (if applicable), your current finances, and your retirement goals. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over the specifics of your plan to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've started to move forward, 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 monitor your plan so it stays consistent with your needs.
Our financial planners and retirement consultants are fiduciary advisors who are legally and morally bound to do what's best for you and only you. We are proud to provide clear communication and excellent service to help you achieve your self-employed retirement goals.
Other services we offer in Swansea, IL include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
Call Correct Capital for Your Swansea, IL Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Swansea, IL financial advisors need to offer more than just sage financial advice. Correct Capital takes pride in getting to know our clients and their business to deliver personalized self-employed retirement plans. We give 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 financial advisor today at 314-930-401(k) or contact us online.