Self-employed retirement plans Torrance, CA. The freedom of being your own boss in Torrance, CA is one of the greatest advantages of being self-employed. However, this independence often comes with a lack of security, particularly when it comes to retirement savings, since you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many would be better off exploring their options. In addition to enjoying a more comfortable retirement, working with a financial advisor in Torrance, CA to set up your self-employed retirement plan offers significant tax advantages that help your business to grow and succeed.
Few Torrance, CA wealth management and retirement planning firms are as attuned to the requirements of small business owners quite like Correct Capital. The father of our founder was a small business owner himself (check out our story here), and we take pride in helping businesses with their retirement planning needs. We know that your goals for your business and retirement go far beyond just monetary concerns, and we are dedicated to create personalized solutions aligned with your vision. Read on to discover about your self-employed retirement plan options in Torrance, CA, or call Correct Capital at 877-930-401k or contact us online to consult with a self-employed financial advisor in Torrance, CA today.
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Why Torrance, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also offer real benefits today. From flexible contributions to considerable tax savings, consulting a financial advisor in Torrance, CA enables you to customize your retirement plan to align with your individual circumstances.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) provides the freedom to tailor how much you save:
- Customizable Contributions: Contribute more during profitable years and cut back when your earnings dip, so your plan fits your cash flow.
- 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—a smart decision if you anticipate your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) shrink your tax liability, so you can keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to compound.
- State-Specific Incentives: In some states, you may be eligible for additional credits as a business owner. These local incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants 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
Creating a stable future requires more than how much you save—it’s also about how you invest:
- Diversified Portfolios: Allocating your investments across a mix of stocks, bonds, and other assets serves to mitigate financial risk while continuing to build your savings.
- Emergency Back-Up: Supplementing your retirement savings with a business emergency fund prevents you from tapping into your nest egg during tough times and risking extra costs.
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 plans ensure the reliable income you’ll need in the future. Keep in mind that while the sale of a business usually creates a capital gain, retirement plan contributions are subject to yearly maximums (e.g., up to $7,000 for IRAs or as much as $70,000 for Solo 401(k)s, factoring in catch-up contributions, based on plan compensation).
- Minimizing Taxes: Making the most of retirement savings helps lower the taxes you’ll owe when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement savings 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 associated with the transaction.
With the right retirement plan, you manage your financial future, reduce your tax burden, and create a solid base 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 for building your retirement fund. 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. This is why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement could lead to a substantial impact on the savings you’ll have when you retire. The main reason is compound interest—the powerful process where your investments generate earnings, and those returns, subsequently, earn even more returns. The greater time span your money has to grow, the greater the effect of compounding.
Example: Two individuals, Alex and Taylor are both entrepreneurs. They each aim to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until 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 contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently often create substantial growth. Here’s a simple scenario showing the impact of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an average annual return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month yields only $235,412.97* by age 65—a shortfall of over $260,000, just from a 10-year delay.
The earlier you begin, the lower your annual savings needs each year to achieve your retirement goals.
*These calculations are based on estimates generated with NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. This information is meant to provide general guidance and do not guarantee future performance. Your individual results may differ due to variables including market conditions, fees, and individual circumstances. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
As a self-employed person in Torrance, CA, it is often the case that you put more emphasis on reinvesting in your business rather than saving for retirement. That said, beginning a plan now gives you the chance to:
- Benefit from tax-free future growth or withdrawals without taxes down the road.
- Enjoy flexible contributions that change with your income.
- Establish a long-term safety measure that ensures stability, no matter how your business changes.
Getting started now, the less you’ll need to worry about making up for lost time later in life. Saving for retirement now means gaining control over your financial future and creating for yourself the freedom to focus on your dreams—both for your golden years and your Torrance, CA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for self-employed individuals in Torrance, CA, each offering its own advantages and considerations. A financial advisor is available to help you understand the pros and cons of each choice and determine the one most suitable for your unique situation. In most cases, your self-employed retirement plan options in Torrance, CA are:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent financial tools for retirement that offer specific tax advantages. In a standard IRA, the money you contribute is often tax-deductible, and investment earnings grow tax-deferred, but money taken out during retirement are taxable. In contrast, with Roth IRAs, you contribute using income already taxed, but retirement withdrawals that qualify, including earnings, are exempt from taxes. In both accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: Unlike plans linked to your job, traditional and Roth IRAs are open to those with a source of income.
Contribution Limits: For 2025, annual contribution limits for IRAs are set at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: SEP IRAs serves as a retirement savings option that allows those who are self-employed to contribute a percentage of their net earnings. Contributions must come from an employer, so, as a independent business owner, you (the employee) would not be able to contribute above 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 set monetary value or a percentage of wages to employee accounts. This type of plan may be ideal for businesses that experience cycles of high revenue and low revenue. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs function like conventional IRAs, where the contributions are tax-deferred and withdrawals are taxed as income.
Eligibility: Both employers and self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), sometimes referred to as an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed meant for companies that have no employees or where the only employee is a spouse. Solo 401(k)s are similar to employer-sponsored 401(k) plans, and allow you to contribute as both an employee or an employer with pre-tax money. This allows for more savings versus SEPs or IRAs; however, the increased savings potential often come with more limited investment options. With this type of plan, 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: As a self-employed individual with a solo 401(k) plan, you have the ability to 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 if you attain age 60-63 in 2025.
- Contributions as an employer (as an employer) are limited to 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.
Total contributions are capped at $70,000, or $77,500 for those aged 50 and older (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans is a retirement option that provides a pre-established payout to business owners upon retirement. As opposed to defined contribution plans, investment returns don’t affect the payout, but lets individuals clearly understand what they'll receive in retirement. This strategy is ideal for high-earning self-employed individuals who are focused on saving a significant sum for retirement and are prepared to contribute sizeable contributions. Contributions offer tax-deferred growth, and withdrawals are taxable as income in retirement.
Eligibility: Self-employed professionals managing a one-person company or with a small staff of under five may establish an individual defined benefit plan, but it's typically suggested for those over 50 who earn at least $250,000 a year. In most cases, good candidates for defined benefit plans include:
- Entrepreneurs who aim to deposit more than $70,000 (or $77,500 if over age 50)
- Businesses currently investing 3-4% and are willing to do more
- Companies showing consistent profit patterns
- Business leaders over age 40 who aim to quickly build retirement savings or accelerate the retirement savings
Contribution Limits: The contribution limit must be determined by an actuary based on your financial situation, age, and savings targets. Contribution limits change annually.
The Importance of a Financial Advisor in Torrance, CA for Your Self-Employed Retirement Plan
Working with a financial advisor in Torrance, CA experienced with retirement plans for the self-employed is an essential partner for self-employed individuals. They offer the knowledge to assist understand the intricacies of saving for retirement and design a customized plan that reflects your aspirations. An expert in your area will review your finances, understand your risk tolerance, and guide you in choosing wisely about saving and investing for retirement. Included in what we do for you involves:
- Help you choose a plan that suits your unique requirements
- Tailor the plan to fit you personally even further
- Create a written plan in accordance with IRS guidelines
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Review and modify your plan to keep it aligned with your goals
- Deliver continuous support and financial insights to help you navigate your retirement journey
- Maximize what you receive in retirement by optimizing your social security benefits
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 retirement savings strategy independently may end up overwhelmed by their options. Through our team at Correct Capital, our Torrance, CA financial advisors manage the majority of your retirement planning for you, and strive to ensure meeting your retirement goals as easy as possible for you. We can help you get set 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 will assess if we're suited to your needs for you and your business. This short conversation allows us to understand what you're looking for with zero commitment or significant effort on your part.
- Gather Information: Should we agree to proceed, we'll gather information, including your employee count, your existing financial picture, and your retirement goals. This allows us to put together a custom plan designed just for you.
- Review Your Plan: Once we've developed a plan using the information you provide, we'll sit down with you and discuss your plan thoroughly to make sure it's clear and show how it aligns with your goals.
- Implementation and Monitoring: When we finalize on your plan, we'll set everything up so you can start saving. As time goes on, we'll have regular meetings and track your progress to keep it tailored to your evolving circumstances.
Our Torrance, CA financial advisors and retirement plan consultants are fiduciary advisors, who are obligated to they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Torrance, CA 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 Torrance, CA
Your business isn't "just a business" to you, and your Torrance, CA financial advisors must deliver more than simply sound financial advice. With Correct Capital, we take the time to get to know our clients and their businesses to provide personalized 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, reach out to Correct Capital at 877-930-401k or contact us online.
