Self-employed retirement plans Tacoma, WA. The freedom of owning your own business in Tacoma, WA is one of the best aspects of having a self-directed career. Even so, this independence sometimes brings with certain challenges, particularly regarding planning for retirement, as you don't have access to employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many could benefit from exploring their options. In addition to enjoying a financially stable retirement, seeking advice from a financial advisor in Tacoma, WA to create your self-employed retirement plan delivers significant tax advantages that enable both you and your business to thrive.
Few Tacoma, WA investment consulting and retirement planning firms are as attuned to the requirements of small business owners quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (read more of our story here), and Correct Capital take pride in helping businesses with their retirement planning needs. We recognize that your business and retirement aspirations aren’t limited to just monetary concerns, and we strive to provide customized solutions to meet your unique goals. Continue exploring to find out about your self-employed retirement plan options in Tacoma, WA, or give us a call at Correct Capital at 877-930-401k or contact us online to consult with a entrepreneurial financial advisor in Tacoma, WA today.
Why Tacoma, WA 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 tangible benefits today. Offering flexibility in contributions to significant tax savings, working with a financial advisor in Tacoma, WA allows you to create your retirement plan to suit your specific needs.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the option to tailor how much you save:
- Customizable Contributions: Set aside more during profitable years and reduce savings when revenues are down, ensuring your plan works with your financial situation.
- Roth Options: Choosing a Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw your savings tax-free down the road—a smart decision if you expect your tax rate will increase in the future.
Save Money on Taxes
Plans designed for the self-employed deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, which gives your money more time to accumulate.
- State-Specific Incentives: Based on your location, you might access additional tax breaks as a business owner. These state-level incentives 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 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across different stocks, bonds, and alternatives serves to mitigate financial risk while helping to grow your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a dedicated business safety net helps you avoid using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Tacoma, WA Business
Retirement planning can assist you plan ahead for what’s next with your Tacoma, WA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and don’t transfer with the business. These plans ensure the steady income you’ll need later on. It’s important to note that while selling your business results in a capital gain, retirement plan contributions are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, based on plan compensation).
- Minimizing Taxes: Using retirement contributions wisely minimizes the taxes you are required to pay when you pass on your business.
- Succession Planning: If you’re passing the business on, your retirement accounts provide financial security during the change. You may also work with a financial advisor with expertise in succession and retirement planning to reduce taxes associated with the transaction.
With the proper savings strategy, you gain control over 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 Tacoma, WA Now?
Time remains one of the most valuable factors in retirement planning. Beginning sooner rather than later not only helps you grow a larger nest egg but also lowers the stress of saving aggressively in the future. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings could lead to a significant impact on the amount you’ll have when you reach retirement age. The primary reason is compound interest—the powerful process where your investments earn returns, and those returns, subsequently, generate even more returns. The longer your money has to grow, the greater the effect of compounding.
Example: Taylor and Alex are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but contributes $7,500 annually to make up for lost time.
By age 65, assuming 7% annual return:
- Alex contributes $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Regular, modest investments invested steadily can lead to impressive growth. Here’s a simple scenario showing the power of compounding:
- Starting at age 25: If you invest $200 per month in a retirement plan with an average annual return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a gap of over $260,000, all because of a 10-year delay.
Saving early, 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, based on a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. The scenarios provided are for illustrative purposes only and are not a promise of future results. Your individual results may differ based on factors such as market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for custom recommendations.
Take Control of Your Financial Future
As a self-employed person in Tacoma, WA, it can be tempting to focus more on reinvesting in your business instead of saving for retirement. Even so, beginning a plan now gives you the chance to:
- Take advantage of tax-free future growth or withdrawals without taxes down the road.
- Enjoy adjustable savings that change with your earnings.
- Establish a financial cushion that offers peace of mind, no matter how your business changes.
Starting early, the less you’ll have to worry about playing catch-up later in life. Saving for retirement now means gaining control over your financial future and creating for yourself the opportunity to concentrate on your dreams—both for your retirement years and your Tacoma, WA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for entrepreneurs in Tacoma, WA, each offering its own benefits and trade-offs. A financial advisor will guide you to understand the advantages and disadvantages of each option and identify the one best suited for your needs. Generally speaking, your self-employed retirement plan options in Tacoma, WA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that provide key tax perks. In a standard IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but money taken out during retirement are taxed as income. In contrast, Roth IRAs require contributions using income already taxed, but qualified withdrawals in retirement, including earnings, are exempt from taxes. In both types of accounts, withdrawals come without penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, both traditional and Roth IRAs are open to those with an earned 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: SEP IRAs offers a way to save for retirement that enables those who are self-employed to set aside a portion of their self-employment income. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role more than the 25% you (the employer) allocate. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a fixed dollar figure or a percentage of wages to employee accounts. A SEP IRA works well for companies with fluctuating revenue streams. Unlike other plans, SEP IRAs don’t have expensive setup or ongoing fees.
SEPs operate like standard IRAs, where the contributions are tax-deferred and retirement distributions are taxable.
Eligibility: Employers of any type, including self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, commonly known as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed designed for businesses with no employees or where the only employee is a spouse. These plans are similar to standard 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the additional opportunities can be balanced by more limited investment options. With this type of 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 can set up 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, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) cannot exceed 25% of your net self-employment income, which is defined as net profit minus half of your self-employment tax and the elective deferrals you made.
Your combined contributions must not surpass $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: The defined benefit plan offers a structured retirement solution that guarantees a set amount to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but enables participants to determine exactly how much they'll receive in retirement. This option is ideal for higher-income professionals who want to save a large amount for retirement and are prepared to contribute sizeable contributions. Contributions offer tax-deferred growth, and withdrawals incur taxes as income in retirement.
Eligibility: Entrepreneurs running an owner-only business or with a small staff of under five can open an individual defined benefit plan, but it's most commonly suggested for people above age 50 who generate a minimum of $250,000 yearly. Generally, good candidates for defined benefit plans are:
- Business owners or partners who want to invest more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Companies showing consistent profit patterns
- Business leaders over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The contribution limit requires calculation from an actuary using your income, age, and retirement goals. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Tacoma, WA for Your Self-Employed Retirement Plan
A financial advisor in Tacoma, WA experienced with retirement plans for the self-employed can be an essential partner for entrepreneurs. They have the expertise to help guide you through the challenges of retirement planning and design a personalized approach that aligns with your goals. An expert in your area will evaluate your financial situation, identify your risk preferences, and assist you in making informed decisions about saving and investing for retirement. Part of what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Further adapt the plan to your needs even further
- Create a written plan as required by IRS rules
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Offer continued financial education and guidance to help you navigate your retirement journey
- Boost your retirement earnings by making the most of your social security
Self-Employed Retirement Plans in Tacoma, WA: Correct Capital's Process
Entrepreneurs in Tacoma, WA who lack the time, interest, or knowledge to manage their retirement savings strategy independently often feel overwhelmed by their options. With Correct Capital, our Tacoma, WA financial advisors take on the bulk of your retirement planning for you, working to make meeting your future savings targets as easy as possible for you. We are here to assist you in setting up your self-employed retirement plan in just four steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This initial call lets us learn about your needs with no obligation or extensive time commitment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including whether you have employees, your current financial situation, and your future objectives. This enables us to craft a tailored approach designed just for you.
- Review Your Plan: Once we've developed a plan using the information you provide, we'll meet with you and review your plan thoroughly to make sure it's clear and understand how it best correlates to your needs.
- Implementation and Monitoring: Once we've agreed on your plan, we'll set everything up so you can initiate your savings journey. Over the course of our partnership, we'll have regular meetings and monitor your plan to ensure it stays suited to your needs.
Our Tacoma, WA financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Tacoma, WA 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 Tacoma, WA
Your business isn't "just a business" to you, and your Tacoma, WA financial advisors need to offer more than basic financial recommendations. At Correct Capital, we focus on building a relationship with our clients and their businesses to create customized self-employed retirement plans. All our clients in Tacoma, WA benefit from our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To get started on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
