Self-employed retirement plans in University City, MO. The flexibility involved with having your own business in University City, MO is a wonderful advantage to being self-employed. But that freedom can come with limited stability, especially in when it comes to building a retirement plan, you don't have an employer who will set up a plan for you. Barely more than 10% of self-employed people have retirement plans they save with, but many would be wise to look into what plans are available. In addition to a more comfortable retirement, working with a financial advisor to set up your self-employed retirement plan in University City, MO offers significant tax advantages that can help drive you and your business forward.
Only a handful of financial advisory and retirement planning firms will understand the needs of the self-employed and small business owners than Correct Capital. Our founder's father was a small business owner himself (you can read more about our story on our website). We know that your business and retirement aspirations transcend mere monetary figures, and we are dedicated to providing personalized solutions that reflect your goals. Read on to learn more about your self-employed retirement plan options in University City, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team today.
What Self-Employed Retirement Plans Are There?
There are many retirement savings options that the self-employed can set up, and which is best for you depends on your unique situation. A University City, MO financial advisor can help you grasp the benefits and drawbacks of each option and select that works best for you. Generally, your self-employed retirement plan options in University City, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that offer specific tax advantages. If you deposit to a traditional IRA, deposits are deducted from your taxable income, and any gains on investments grow tax-deferred, but distributions in retirement are subject to income tax. In contrast, Roth IRA contributions are made with after-tax income, but qualified distributions in retirement, including investment gains, are tax-free. In both accounts, distributions can be made without penalty 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 can be set up by anyone with an earned income.
Contribution Limits: For 2023, the maximum yearly contributions for IRAs are $6,500, or $7,500 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that allows self-employed individuals to contribute a share of of their net earnings from self-employment. As a self-employed individual, your contributions are limited to the amount already contributed by you (the employer), which cannot be more than 25%. If you have employees, they must receive the same amount you do. You can either contribute either a fixed dollar sum or a percentage of annual income to employee accounts. SEP IRAs may be a good self-employed retirement plan if your business goes through cycles of high revenue and low revenue. SEP IRAs don't have expensive initial setup or administrative charges other retirement plans do.
SEPs work like traditional IRAs, where payments are made with pre-tax money and distributions are taxed at your income at the time of withdrawal.
Eligibility: Any employer, including the self-employed, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are whichever is the least out of:
- 25% of compensation, or
- $66,000
For self-employed people, the maximum amount you can contribute in a given year is based on a specific formula.
Solo 401(k)
Plan Overview: A Solo 401(k) plan, also known as an Individual 401(k) or one-participant 401(k) plan, is a self-employed retirement plan for businesses with no employees or who only employ a spouse. Solo 401(k)s work in the same same way as employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers more savings than SEPs or IRAs, however the additional opportunities for saving are often counteracted by having less investment options available. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which each enjoy the same tax advantages as their IRA contribution counterparts.
Eligibility: Only sole proprietors and their spouses have access to individual 401(k)s.
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you can make two types of contributions:
- Elective deferrals (as an employee) of 100% of your earned income from self-employment, up to the annual contribution limit. In 2023, those limits are $22,500, or $30,000 if you are 50 or older.
- Employer profit-sharing contributions (as an employer) of up to 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.
On an annual basis, contributions cannot exceed $66,000, or $73,500 if you're over age 50 (in 2023).
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement plan that offers a a predetermined monthly figure to self-employed individuals upon retirement. As opposed to the defined contribution plans mentioned above, a defined benefit plan doesn't oscillate based on investment returns, but allows self-employed individuals to know exactly what they'll receive in retirement. This plan is ideal for high-earning self-employed individuals who want to save a a substantial portion for retirement and want to add significant contributions. Contributions are tax deferred and contributions are taxed as income in retirement.
Eligibility: Any self-employed individual who runs an owner-only business or has less than five employees can open an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn well into the six figures. Typically, good candidates for defined benefit plans are:
- Partners or owners who want to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are willing to do more
- Companies who have demonstrated consistent profit patterns
- Partners or owners over age 40 who want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is calculated by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
The Importance of a Financial Advisor for Your Self-Employed Retirement Plan in University City, MO
A financial advisor in University City, MO specialized in self-employed retirement plans can be a crucial partner for self-employed individuals. They have the expertise to help you understand the complexities of retirement planning and create a personalized approach that acts as a roadmap through your financial future. A financial advisor will analyze where your finances currently are, understand your risk tolerance, and help you make smart decisions about your financial future. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Personalize the plan to your needs even further
- Adopt a written plan in accordance with IRS regulations
- Arrange a trust plan for assets
- Implement a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and guidance into and through retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in University City, MO: Correct Capital's Process
University City, MO business owners who don't have the time, desire, or knowledge to handle their self-employed retirement plan themselves can become stressed with the different options available to them. At Correct Capital, our financial advisors handle the bulk of the retirement planning work on your behalf, and endeavor to make meeting the golden years of your dreams as simple as possible for you. We can help you get set up with your self-employed retirement plan in a straightforward four-step process:
- Schedule a Call — We only need a short 20-minute call for a member of our advisor team to know if we're a good fit for you and your business. This short introduction allows us to understand your needs with no obligation on your part.
- Gather Information — If we both decide to move forward, we'll request more info, including how many employees you have (if any), your current financial situation, and your retirement goals. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and discuss the specifics of your plan to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so you can start saving. Throughout your time partnering with us, we'll keep you up-to-date with how things are going and monitor your plan so it stays consistent with your needs.
Our financial advisors and retirement consultants are fiduciary advisors who are legally and morally obligated to do what's in your best interest. We pride ourselves in providing straightforward communication and excellent service to help you attain your self-employed retirement goals.
Other services we offer in University City, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
Call Correct Capital for Your University City, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your University City, MO financial advisors need to offer more than simply sound financial advice. Correct Capital takes pride in getting to know our clients and what makes them and their business tick to deliver personalized self-employed retirement plans. We give all our University City, MO clients the same I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To get started on your self-employment retirement plan in University City, MO, speak to a member of our team today at 877-930-4015 or fill out our online form.
