Self-employed retirement plans Torrance, CA. The independence of owning your own business in Torrance, CA is one of the best aspects of having a self-directed career. However, this flexibility sometimes brings with a lack of security, especially when it comes to building your retirement fund, as you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, yet countless would be better off exploring their options. In addition to achieving a more comfortable retirement, working with a financial advisor in Torrance, CA to create your self-employed retirement plan delivers significant tax advantages that allow both you and your business to thrive.
Few Torrance, CA investment consulting and retirement planning firms understand the needs of small business owners better than Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (check out our story here), and our firm are deeply experienced in supporting entrepreneurs with their retirement planning needs. We know that your professional and personal aspirations go far beyond simple financial figures, and we strive to create customized solutions to meet your unique goals. Keep reading to learn more 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 small business financial advisor in Torrance, CA today.
Why Torrance, CA 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 immediate benefits today. Offering flexibility in contributions to considerable tax savings, working with a financial advisor in Torrance, CA allows you to create your retirement plan to align with 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 modify how much you save:
- Customizable Contributions: Contribute more during profitable years and cut back when revenues are down, so that your plan fits your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, so you can withdraw your savings tax-free down the road—a smart decision if you expect your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer significant tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, allowing you to keep more of your earnings.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, which gives your money more time to accumulate.
- State-Specific Incentives: Depending on where you live, you could qualify for additional tax breaks as a self-employed individual. These state-level incentives make these plans even more advantageous.
- 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, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Building a secure retirement 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 can help minimize exposure to risk while still growing your nest egg.
- Emergency Back-Up: Supplementing your retirement savings with a financial buffer for your business prevents you from using your retirement funds during financial hardships and risking extra costs.
Plan for the Future of Your Torrance, CA Business
Retirement planning enables you to plan ahead for what’s next with your Torrance, CA business:
- Selling Your Business: If you’re planning to sell, plans like SEP IRAs or Solo 401(k)s stay in your name and are not part of the sale. These savings can provide the reliable income you’ll need in the future. Remember that while the sale of a business usually creates a capital gain, deposits into these plans are restricted by contribution limits (e.g., a maximum of $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, factoring in catch-up contributions, according to plan rules).
- Minimizing Taxes: Making the most of retirement savings minimizes the taxes you might face when you transfer your business.
- Succession Planning: Whether you’re transferring ownership, your nest egg ensure financial security as you make this shift. You may also partner with a financial advisor who specializes in succession planning and retirement accounts to reduce taxes during the sale.
With the best-fit retirement strategy, you manage your financial future, cut down your tax obligations, and create a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Torrance, CA Now?
There’s no denying that time is one of the most valuable assets for building your retirement fund. Getting a head start not only lets you accumulate a larger nest egg but also reduces the financial burden of saving aggressively in the future. This is why it pays to take action now:
The Cost of Waiting
Putting off saving for retirement may cause a major impact on the savings you’ll have when you retire. The main reason is compound interest—the financial principle where your investments generate earnings, and those returns, subsequently, earn even more returns. The longer your money has to grow, the more significant the impact of compounding.
Example: Alex and Taylor are both self-employed professionals. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but saves $7,500 annually to make up for lost time.
By age 65, with an assumption of 7% annual return:
- Alex contributes $180,000 and ends up with $691,184.39*.
- Taylor puts in $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Regular, modest investments made consistently often create substantial growth. Consider this example showing the impact of compounding:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month leaves you with only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
The earlier you begin, the less effort required each year to achieve your retirement goals.
*The numbers shown in this scenario are 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 for illustrative purposes only and cannot predict actual future outcomes. Your individual results may differ depending on elements like market conditions, fees, and individual circumstances. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Torrance, CA, it can be tempting to prioritize reinvesting in your business over saving for retirement. Even so, starting a plan now allows you to:
- Benefit from tax-free future growth or withdrawals without taxes down the road.
- Benefit from flexible contributions that change with your income.
- Create a financial cushion that ensures stability, no matter how your business changes.
Starting early, the less you’ll have to worry about making up for lost time later in life. Saving for retirement now means taking control of your financial future and allowing yourself the opportunity to concentrate on your goals—both for your retirement years and your Torrance, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for self-employed individuals in Torrance, CA, each providing its own pros and cons. A financial advisor is available to help you understand the advantages and disadvantages of each plan and identify the one ideal for your needs. In most cases, your self-employed retirement plan options in Torrance, CA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that provide specific tax advantages. In a standard IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but retirement distributions are subject to income tax. In contrast, Roth IRA contributions using income already taxed, but eligible distributions during retirement, including earnings, are tax-free. In both cases, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are available to anyone with an earned income.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs is a retirement plan that permits self-employed individuals to save a percentage of their net business profits. Contributions must come from an employer, so, as a self-employed individual, you (the employee) cannot make additional contributions 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. You have the flexibility to contribute a set monetary value or a percentage of wages to employee accounts. This type of plan is a good option for businesses that experience fluctuating revenue streams. Compared to other retirement options, SEP IRAs lack the high fees associated with starting or maintaining other plans.
SEPs work like standard IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
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
If you’re self-employed, 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 savings option for the self-employed intended for businesses without employees or if the only employee is your spouse. This type of plan 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 allows for more savings compared to SEPs or IRAs; however, the additional opportunities often come with more limited investment options. Using a solo 401(k), you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses may establish 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:
- Deferrals as an employee of up to 100% of your self-employment income, capped at the annual contribution limit. For 2025, the limits will be $23,500, or $31,000 if you are 50 or older, or $34,750 for those who turn 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) must not surpass 25% of your adjusted self-employment income, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (as of 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that guarantees a set amount to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, investment returns don’t affect the payout, but allows self-employed individuals to know exactly how much they'll have in retirement. This option is ideal for higher-income professionals who are focused on saving a substantial amount for retirement and can commit to making sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals are taxed as income upon retirement.
Eligibility: Entrepreneurs operating a solo business or with less than five employees may establish an individual defined benefit plan, but it's most commonly recommended for those over 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans include:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% but are open to increasing contributions
- Companies that have demonstrated 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 is calculated by an actuary using your income, age, and retirement goals. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Torrance, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Torrance, CA focused on self-employed retirement strategies is an invaluable resource for those working for themselves. They have the expertise to help guide you through the challenges of retirement planning and craft a tailored strategy that reflects your aspirations. Your advisor in Torrance, CA will assess where you stand financially, determine how much risk you’re comfortable with, and guide you in choosing wisely about saving and investing for retirement. Included in what we do for you includes:
- Assist in selecting a plan that suits your unique requirements
- Further adapt the plan to your needs even further
- Adopt a written plan that complies with IRS regulations
- Arrange a trust plan for assets
- Make sure you understand the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Offer continued financial education and guidance as you continue on the road to retirement
- Maximize what you receive in retirement 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 aren’t equipped with the time or understanding to handle their self-employed retirement plan independently may end up overwhelmed when faced with their choices. Through our team at Correct Capital, our Torrance, CA financial advisors manage the bulk of your savings plan setup for you, working to make meeting your future savings targets as straightforward 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: A quick 20-minute call is all it takes, a member of our advisor team can determine if our services align for you and your business. This brief introduction allows us to learn about your needs with no obligation or significant effort on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including your employee count, your current financial situation, and your long-term savings targets. This allows us to put together a tailored approach suited specifically for your needs.
- Review Your Plan: When we finalize a plan from the information you provide, we'll meet with you and discuss your plan in detail to help you fully grasp it and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll set everything up so you can begin contributing. Over the course of our partnership, we'll meet with you and track your progress to keep it tailored to your evolving circumstances.
Our Torrance, CA financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Torrance, CA 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 Torrance, CA
Your business isn't "just a business" to you, and your Torrance, CA financial advisors must deliver more than just good financial guidance. At Correct Capital, we focus on building a relationship with our clients and their businesses to deliver personalized self-employed retirement plans. We offer all our Torrance, CA clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To begin on your self-employment retirement plan, call Correct Capital today at 877-930-401k or contact us online.
