Self-employed retirement plans Washington, DC. The independence of owning your own business in Washington, DC is one of the greatest advantages of working for yourself. However, this independence sometimes brings with certain challenges, notably when it comes to building your retirement fund, because you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off exploring their options. In addition to achieving a financially stable retirement, partnering with a financial advisor in Washington, DC to create your self-employed retirement plan delivers significant tax advantages that allow your business to grow and succeed.
Few Washington, DC financial advisory and retirement planning firms truly grasp the challenges faced by self-employed individuals better than Correct Capital. The father of our founder was a small business owner himself (read more of our story here), and Correct Capital are deeply experienced in supporting entrepreneurs with their retirement planning needs. We understand that your goals for your business and retirement extend well past just monetary concerns, and we work tirelessly to offer customized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Washington, DC, or give us a call at Correct Capital at 877-930-401k or contact us online to consult with a small business financial advisor in Washington, DC today.
Why Washington, DC Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver real benefits today. From flexible contributions to substantial tax savings, working with a financial advisor in Washington, DC enables you to design your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
For those with fluctuating income from year to year, a plan like a SEP IRA or Solo 401(k) offers the flexibility to modify how much you save:
- Customizable Contributions: Set aside more during successful years and reduce savings when revenues are down, ensuring your plan works with your current income.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, enabling you to withdraw without tax penalties in the future—a wise move if you believe your tax rate is likely to rise 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 lower your taxable income, allowing you to keep more of your hard-earned money.
- Tax-Deferred Growth: Your savings grow untaxed until withdrawn, providing your money more time to compound.
- State-Specific Incentives: Depending on where you live, you could qualify for state-specific deductions as a self-employed individual. These state-level incentives make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can claim a tax credit of up to 50% of the first $2,000 put into a retirement plan, further reducing 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 about how you invest:
- Diversified Portfolios: Allocating your investments across different stocks, bonds, and other assets serves to reduce risk while helping to grow your nest egg.
- Emergency Back-Up: Combining your retirement strategy and a financial buffer for your business helps you avoid dipping into savings during financial hardships and incurring penalties.
Plan for the Future of Your Washington, DC Business
Retirement planning also helps you prepare for what’s next with your Washington, DC business:
- Selling Your Business: When selling your business, plans like SEP IRAs or Solo 401(k)s remain your personal assets and don’t transfer with the business. These plans can provide the reliable income you’ll need later on. Remember that while selling a business often leads to a capital gain, deposits into these plans are restricted by contribution limits (e.g., as much as $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you are required to pay when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement accounts ensure a stable foundation as you make this shift. You may also seek advice from a financial advisor experienced in both succession and retirement strategies to help with taxes associated with the transaction.
With the proper savings strategy, you manage your financial future, cut down your tax obligations, and create a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Washington, DC Now?
Time is one of the most crucial assets for building your retirement fund. Starting early not only allows you to build a bigger financial cushion but also reduces the pressure of catching up later in life. The following are reasons why it makes sense to begin today:
The Cost of Waiting
Putting off saving for retirement may cause a substantial impact on the savings you’ll have when you retire. The biggest reason is compound interest—the powerful process where your investments grow, and those returns, in turn, accumulate even more returns. The greater time span your money has to grow, the larger the benefit of this compounding process.
Example: Taylor and Alex are both entrepreneurs. Their shared goal is to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and ends up with $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently often create substantial growth. Take a look at this scenario showing the impact of compound interest:
- Starting at age 25: Putting aside $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Investing the same $200 per month yields only $235,412.97* by age 65—a gap of over $260,000, simply due to a 10-year delay.
Starting sooner, the less you need to save each year to meet your retirement goals.
*The figures provided in this example are estimates derived from NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. This information is meant to provide general guidance and do not guarantee future performance. Your individual results may differ based on elements like market conditions, fees, and personal factors. We recommend consulting a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
For self-employed individuals in Washington, DC, it is often the case that you focus more on reinvesting in your business instead of saving for retirement. Even so, starting a plan now gives you the chance to:
- Benefit from tax-deferred growth or tax-free withdrawals down the road.
- Take advantage of flexible contributions that change with your earnings.
- Create a long-term safety measure that ensures stability, no matter how your business changes.
The sooner you start, the less you’ll be required 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 future retirement and your Washington, DC business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options designed for entrepreneurs in Washington, DC, each with its own benefits and trade-offs. A financial advisor is available to help you evaluate the benefits and drawbacks of each choice and identify the one ideal for your circumstances. In most cases, your self-employed retirement plan options in Washington, DC include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are retirement savings vehicles that provide key tax perks. In a traditional IRA, contributions are typically tax-deductible, and earnings grow without immediate taxation, but withdrawals in retirement are subject to income tax. In contrast, Roth IRA contributions from post-tax earnings, but retirement withdrawals that qualify, including earnings, are exempt from taxes. In both types of accounts, withdrawals don’t incur penalties if you are at least 59½.
Eligibility: Unlike plans linked to your job, IRAs, including traditional and Roth options are available to anyone with a source of 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: The Simplified Employee Pension IRA offers a way to save for retirement that enables self-employed individuals 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) already contributed. If you have employees, you must contribute the same amount for them as you do for yourself. You have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. A SEP IRA works well for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs are free of costly startup or administrative fees.
SEPs work like standard IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
Eligibility: Both employers and self-employed individuals can set up a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 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), sometimes referred to 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 when the sole employee is your spouse. These plans are similar to standard 401(k) plans, and let you make contributions as both an employer and an employee with pre-tax money. This offers more savings compared to SEPs or IRAs; however, the extra savings options often come with more constrained investment avenues. 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: This plan is exclusively for business owners and their spouses are eligible to open 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-employed earnings, subject to 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.
- Employer profit-sharing contributions (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 elective deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (in 2025), $81,250 for those aged 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that delivers a pre-established payout to business owners upon retirement. As opposed to defined contribution plans, a defined benefit plan doesn't fluctuate based on investment returns, but allows self-employed individuals to know exactly how much they'll get in retirement. This option is ideal for high-earning self-employed individuals who aim to accumulate a significant sum for retirement and can commit to making larger deposits. Contributions offer tax-deferred growth, and withdrawals incur taxes as income during retirement.
Eligibility: Entrepreneurs operating a solo business or employing fewer than five people may establish an individual defined benefit plan, but it's generally recommended for individuals aged 50+ who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Partners or owners who desire to contribute more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Companies that have demonstrated consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The maximum allowable contribution is calculated by an actuary determined by your income, age, and retirement goals. Contribution limits are adjusted each year.
The Importance of a Financial Advisor in Washington, DC for Your Self-Employed Retirement Plan
Working with a financial advisor in Washington, DC experienced with retirement plans for the self-employed can be an essential partner for self-employed individuals. They bring the skills needed to understand the intricacies of saving for retirement and craft a customized plan that reflects your aspirations. A financial advisor in Washington, DC will assess where you stand financially, identify your risk preferences, and assist you in selecting the best options about saving and investing for retirement. A key part of what we do for you includes:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Tailor the plan to fit you personally 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
- Track and fine-tune your plan as needed
- Deliver continuous support and financial insights as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Washington, DC: Correct Capital's Process
Entrepreneurs in Washington, DC who aren’t equipped with the time or understanding to oversee their retirement savings strategy on their own often feel overwhelmed when faced with their available plans. At Correct Capital, our Washington, DC financial advisors take on the lion's share of your retirement planning for you, to help make meeting your future savings targets 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 our services align for you and your business. This brief introduction helps us learn about your needs with zero commitment or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including your employee count, your existing financial picture, and your future objectives. This allows us to put together a custom plan that aligns with your goals.
- Review Your Plan: When we finalize 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: After we agree on your plan, we'll set everything up so you can start saving. Over the course of our partnership, we'll have regular meetings and review your strategy to make sure it remains aligned with your goals.
Our Washington, DC financial advisors and retirement plan consultants act as fiduciary advisors, meaning they are required by law and ethical standards to prioritize your needs above all else.
Other financial advisory services we offer in Washington, DC include:
- Independent Financial Advisor
- Roth Conversion
- 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 Washington, DC
Your business isn't "just a business" to you, and your Washington, DC financial advisors should provide more than just good financial guidance. With Correct Capital, we take the time to get to know our clients and their businesses to create personalized self-employed retirement plans. To every client in Washington, DC, we provide our I.O.U. promise: all guidance we provide will be independent, objective, and unbiased. To begin on your self-employment retirement plan, contact Correct Capital now at 877-930-401k or contact us online.
