Self-employed retirement plans Torrance, CA. The independence of running your own company in Torrance, CA is one of the greatest advantages of being self-employed. However, this flexibility often comes with potential drawbacks, notably when it comes to building your retirement fund, 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 looking into other possibilities. In addition to having a financially stable retirement, seeking advice from a financial advisor in Torrance, CA to set up your self-employed retirement plan can provide significant tax advantages that enable you to move your business forward.
Few Torrance, CA wealth management and retirement planning firms are as attuned to the requirements of entrepreneurs better than Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and we are deeply experienced in supporting entrepreneurs with their retirement planning needs. We know that your professional and personal aspirations extend well past simple financial figures, and we work tirelessly to create personalized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Torrance, CA, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Torrance, CA today.
Why Torrance, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide real benefits today. From flexible contributions to substantial tax savings, partnering with a financial advisor in Torrance, CA helps you customize your retirement plan to suit your unique financial situation.
Flexibility That Fits Your Income
If your income changes from year to year, a plan like a SEP IRA or Solo 401(k) gives you the option to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and reduce savings when your earnings dip, so that your plan works with your financial situation.
- Roth Options: A Roth Solo 401(k) lets you pay taxes on contributions now, enabling you to withdraw your savings tax-free down the road—an advantageous choice if you believe your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals deliver significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, helping you keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, giving your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you might access extra credits as a sole proprietor. These state-level incentives make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 contributed a retirement plan, further reducing your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement requires more than how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Distributing your investments across different asset classes like stocks and bonds serves to minimize exposure to risk while continuing to build your savings.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund prevents you from dipping into savings during tough times and facing tax penalties.
Plan for the Future of Your Torrance, CA Business
Retirement planning can assist you think through what’s next with your Torrance, CA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s stay in your name and won’t be included in the sale. These accounts offer the reliable income you’ll need in the future. It’s important to note that while selling your business results in a capital gain, contributions to retirement accounts are subject to yearly maximums (e.g., up to $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Making the most of retirement savings helps lower the taxes you might face when you sell your business.
- Succession Planning: If you’re passing the business on, your nest egg offer financial security as you make this shift. You may also seek advice from a financial advisor who specializes in succession planning and retirement accounts to help with taxes during the sale.
With the proper savings strategy, you manage your financial future, cut down your tax obligations, and build a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Torrance, CA Now?
Time is one of the most crucial assets when it comes to saving for retirement. Getting a head start not only allows you to build a more substantial retirement fund but also lowers the financial burden of catching up later in life. This is 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 reach retirement age. The main reason is compound interest—the concept where your investments earn returns, and those returns, in turn, generate even more returns. The longer your money has to grow, the greater the effect of compounding.
Example: Alex and Taylor are both entrepreneurs. Both of them want to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but puts away $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and achieves a total of $691,184.39*.
- Taylor invests $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions invested steadily may result in substantial growth. Consider this example showing the power of compound interest:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an projected return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, just from a 10-year delay.
Starting sooner, the less you need to save each year to meet your retirement goals.
*These calculations are based on estimates derived from 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 meant to provide general guidance and are not a promise of future results. Actual results may vary based on elements like market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
If you’re self-employed in Torrance, CA, it can be tempting to prioritize reinvesting in your business rather than saving for retirement. That said, starting a plan now enables you to:
- Take advantage of tax-deferred growth or tax-free withdrawals in the future.
- Enjoy flexible contributions that change with your earnings.
- Establish a long-term safety measure that provides security, no matter how your business evolves.
The sooner you start, the less you’ll have to worry about playing catch-up later in life. Taking steps toward your retirement goals today means taking control of your financial future and giving yourself the ability to focus on your objectives—both for your golden years and your Torrance, CA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options designed for those working for themselves in Torrance, CA, each with its own benefits and trade-offs. A financial advisor is available to help you evaluate the advantages and disadvantages of each plan and identify the one ideal for your unique situation. Typically, your self-employed retirement plan options in Torrance, CA consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent long-term savings plans that include distinct tax benefits. In a conventional IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but withdrawals in retirement are taxable. In contrast, Roth IRAs require contributions are made with after-tax income, but qualified withdrawals in retirement, including earnings, are tax-free. In both cases, withdrawals come without penalties provided you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, IRAs, including traditional and Roth options are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that permits entrepreneurs to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions beyond 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. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs works well for companies with cycles of high revenue and low revenue. Unlike other plans, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs function like standard IRAs, where you contribute pre-tax dollars and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including self-employed individuals can set up 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
As a self-employed person, the amount eligible to be contributed is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), commonly known as an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan designed for businesses without employees or if the only employee is your spouse. These plans operate much like traditional employer-managed 401(k) plans, and let you make contributions 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 often come with more constrained investment avenues. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: This plan is exclusively for 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 can make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employed earnings, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Profit-sharing contributions (as an employer) must not surpass 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.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (as of 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan represents a type of retirement plan that provides a pre-established payout to business owners upon retirement. In contrast to the plans discussed earlier, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know what they'll receive in retirement. This plan is recommended for high-earning entrepreneurs who aim to accumulate a significant sum for retirement and are willing to make larger deposits. Contributions offer tax-deferred growth, and withdrawals are taxable as income in retirement.
Eligibility: Entrepreneurs managing a one-person company or with less than five employees may establish an individual defined benefit plan, but it's most commonly recommended for people above age 50 who generate a minimum of $250,000 yearly. Generally, good candidates for defined benefit plans include:
- Business owners or partners who aim to deposit more than $70,000 (or $77,500 for individuals 50 and older)
- Businesses currently investing 3-4% with plans to contribute more
- Companies that have demonstrated consistent profit patterns
- Business leaders over age 40 who wish to accelerate savings or increase their retirement contributions rapidly
Contribution Limits: The cap on contributions must be determined by an actuary based on your earnings, age, and retirement objectives. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Torrance, CA for Your Self-Employed Retirement Plan
Working with a financial advisor in Torrance, CA focused on self-employed retirement strategies is an important asset for entrepreneurs. They have the expertise to help navigate the complexities of retirement planning and craft a customized plan that matches your objectives. Your advisor in Torrance, CA will assess where you stand financially, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. Included in what we do for you involves:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Further adapt the plan to fit you personally even further
- Adopt a written plan as required by IRS rules
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Monitor and adjust your plan when necessary
- Provide ongoing education and advice to help you navigate your retirement journey
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Torrance, CA: Correct Capital's Process
Self-employed individuals in Torrance, CA who don’t have the time or expertise to handle their retirement savings strategy themselves may end up overwhelmed as they look at their options. With Correct Capital, our Torrance, CA financial advisors manage the bulk of your retirement strategy for you, to help make meeting your retirement goals as straightforward as possible for you. We can help you get set up your self-employed retirement plan in just four steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team will assess if we're a good fit for you and your business. This initial call lets us learn about your needs with no pressure or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll gather information, including how many employees you have (if any), your current financial situation, and your long-term savings targets. This enables us to craft a tailored approach that aligns with your goals.
- Review Your Plan: After we put together a plan using the information you provide, we'll sit down with you and review your plan step by step to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll set everything up so you can begin contributing. Over the course of our partnership, we'll have regular meetings and track your progress to ensure it stays suited to your needs.
Our Torrance, CA financial advisors and retirement plan consultants act as fiduciary advisors, who are obligated to they are required by law and ethical standards to do what's in your best interest.
Other financial advisory services we offer in Torrance, CA include:
- Investment Management
- 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 Torrance, CA
You don't see your business as "just a business", and your Torrance, CA financial advisors need to offer more than just good financial guidance. At Correct Capital, we focus on building a relationship with our clients and their businesses to provide tailored self-employed retirement plans. To every client in Torrance, CA, we provide our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
