Self-employed retirement plans Tacoma, WA. The flexibility of being your own boss in Tacoma, WA is one of the best aspects of being self-employed. However, this independence sometimes brings with potential drawbacks, particularly regarding retirement savings, since you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off looking into other possibilities. In addition to having a financially stable retirement, seeking advice from a financial advisor in Tacoma, WA to establish your self-employed retirement plan delivers significant tax advantages that allow both you and your business to thrive.
Few Tacoma, WA wealth management and retirement planning firms understand the needs of entrepreneurs quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (learn more about our story here), and Correct Capital take pride in assisting business owners in their retirement planning needs. We know that your business and retirement aspirations extend well past just monetary concerns, and we work tirelessly to provide personalized solutions that reflect your objectives. Keep reading to learn more about your self-employed retirement plan options in Tacoma, WA, or call Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Tacoma, WA today.
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Why Tacoma, WA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also offer immediate benefits today. From flexible contributions to substantial tax savings, consulting a financial advisor in Tacoma, WA enables you to design your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the flexibility to modify how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when income is lower, so that your plan fits your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, allowing you to withdraw without tax penalties in the future—an advantageous choice if you anticipate your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed provide significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to compound.
- State-Specific Incentives: Depending on where you live, you may be eligible for additional tax breaks as a self-employed individual. These local incentives help make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax 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 goes beyond just how much you save—it’s also about how you invest:
- Diversified Portfolios: Spreading your investments across different stocks, bonds, and alternatives is a smart way to minimize exposure to risk while helping to grow your retirement fund.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business helps you avoid tapping into your nest egg during financial hardships and facing tax penalties.
Plan for the Future of Your Tacoma, WA Business
Retirement planning enables you to prepare for what’s next with your Tacoma, WA business:
- Selling Your Business: When selling your business, retirement accounts like SEP IRAs and Solo 401(k)s remain yours and are not part of the sale. These savings offer the reliable income you’ll need during retirement. It’s important to note that while selling a business often leads to a capital gain, contributions to retirement accounts are subject to yearly maximums (e.g., a maximum of $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions helps lower the taxes you might face when you transfer your business.
- Succession Planning: If you’re passing the business on, your retirement accounts provide a stable foundation during the change. You might want to partner with a financial advisor experienced in both succession and retirement strategies to reduce taxes on the sale.
With the proper savings strategy, you gain control over 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 Tacoma, WA Now?
Time is one of the most important resources for building your retirement fund. Starting early not only allows you to build a bigger financial cushion but also minimizes the pressure of saving aggressively in the future. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Putting off saving for retirement can have a major impact on the total you’ll have when you retire. The primary reason is compound interest—the powerful process where your investments generate earnings, and those returns, in turn, generate even more returns. The longer your money has to grow, the larger the impact of this growth.
Example: Two individuals, Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor delays savings until age 40 but puts away $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Small, consistent savings made consistently can lead to significant growth. Here’s a simple scenario showing the power of compound interest:
- Starting at age 25: By investing $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month leaves you with only $235,412.97* by age 65—a gap of over $260,000, just from a 10-year delay.
Saving early, the lower your annual savings needs each year to reach your retirement goals.
*The figures provided in this example are estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. The scenarios provided are for illustrative purposes only and cannot predict actual future outcomes. Outcomes may change based on variables including market conditions, fees, and personal factors. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in Tacoma, WA, it is often the case that you prioritize reinvesting in your business rather than saving for retirement. Even so, starting a plan now allows you to:
- Benefit from growth that is tax-deferred or tax-free withdrawals later on.
- Benefit from flexible contributions that change with your income.
- Establish a financial cushion that provides security, no matter how your business develops.
Getting started now, the less you’ll have to worry about making up for lost time later in life. Taking steps toward your retirement goals today means taking control of your financial future and giving yourself the opportunity to concentrate on your goals—both for your retirement years and your Tacoma, WA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for entrepreneurs in Tacoma, WA, each providing its own advantages and considerations. A financial advisor is available to help you learn about the benefits and drawbacks of each option and identify the one ideal for your circumstances. Generally speaking, your self-employed retirement plan options in Tacoma, WA include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that provide key tax perks. In a conventional IRA, contributions are typically tax-deductible, and investment earnings grow tax-deferred, but withdrawals in retirement are taxable. In contrast, Roth IRA contributions using income already taxed, 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: While many retirement plans, such as 401(k)s, are tied to employment, IRAs, including traditional and Roth options are available to anyone with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $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 entrepreneurs to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a sole proprietor, you (the employee) cannot make additional contributions beyond the 25% you (the employer) already contributed. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. A SEP IRA works well for entrepreneurs facing periods of inconsistent earnings. Compared to other retirement options, SEP IRAs lack expensive setup or ongoing fees.
SEPs work like standard IRAs, where the contributions are tax-deferred and withdrawals are taxed as income.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are capped at the lower of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan designed for companies that have no employees or if the only employee is your spouse. Solo 401(k)s are similar to traditional employer-managed 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This provides more savings compared to SEPs or IRAs; however, the increased savings potential can be balanced by more restricted investment choices. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses are eligible to open and contribute to a solo 401(k).
Contribution Limits: For self-employed individuals with a solo 401(k) plan, you can make two types of contributions:
- Employee contributions of up to 100% of your earned income from self-employment, subject to the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 if you attain age 60-63 in 2025.
- Contributions as an employer (as an employer) cannot exceed 25% of your net earnings from self-employment, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that delivers a fixed, predetermined benefit to self-employed individuals upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but lets individuals clearly understand the precise amount they'll get in retirement. This option is best suited for higher-income self-employed individuals who want to save a large amount for retirement and can commit to making substantial contributions. Contributions are tax deferred, and withdrawals are taxed as income during retirement.
Eligibility: Entrepreneurs operating a solo business or with a small staff of under five are eligible to open an individual defined benefit plan, but it's most commonly advised for people above age 50 who make $250,000 or more annually. In most cases, good candidates for defined benefit plans tend to be:
- Business owners or partners who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% but are open to increasing contributions
- Organizations 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 financial situation, age, and savings targets. Contribution limits are updated yearly.
The Importance of a Financial Advisor in Tacoma, WA for Your Self-Employed Retirement Plan
A financial advisor in Tacoma, WA specialized in self-employed retirement plans can be an invaluable resource for entrepreneurs. They bring the skills needed to navigate the complexities of retirement planning and design a tailored strategy that aligns with your goals. An expert in your area will evaluate your financial situation, identify your risk preferences, and guide you in selecting the best options about saving and investing for retirement. A key part of what we do for you features:
- Help you choose a plan that best fits your needs and goals
- Tailor the plan to fit you personally even further
- Formalize a plan in writing in accordance with IRS guidelines
- Set up an asset trust plan
- Make sure you understand the plan's terms
- Track and fine-tune your plan to keep it aligned with your goals
- Provide ongoing education and advice as you continue on the road to retirement
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Tacoma, WA: Correct Capital's Process
Self-employed individuals in Tacoma, WA who lack the time, interest, or knowledge to handle their own retirement planning on their own often feel overwhelmed by their options. At Correct Capital, our Tacoma, WA financial advisors take on the majority of your retirement planning for you, to help make meeting your financial objectives as straightforward 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: A quick 20-minute call is all it takes, a member of our advisor team can help understand if our services align for you and your business. This initial call allows us to understand what you're looking for with no obligation or extensive time commitment 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 helps us create a tailored approach 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 discuss your plan thoroughly to ensure you understand 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 initiate your savings journey. Throughout our relationship, we'll have regular meetings and review your strategy to make sure it remains aligned with your goals.
Our Tacoma, WA financial advisors and retirement plan consultants serve as fiduciary advisors, which means they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Tacoma, WA include:
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
- Fiduciary Financial Advisor
Call Correct Capital for Your Self-Employed Retirement Plan in Tacoma, WA
Your business isn't "just a business" to you, and your Tacoma, WA financial advisors should provide more than simply sound financial advice. At Correct Capital, we make it a priority to understand our clients and their businesses to deliver personalized self-employed retirement plans. We offer all our Tacoma, WA clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To begin on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
