Self-employed retirement plans in Wentzville, MO. The freedom of running your own business in Wentzville, MO is a fantastic aspect of being self-employed. But that freedom can come with a lack of security, particularly in terms of saving for retirement, you don't have an employer who will set up a plan for you. Only a fraction of self-employed people have a workplace retirement plan, but many would be better off exploring 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 Wentzville, MO offers favorable tax incentives that can help free up much-needed funds for your business.
Not many wealth management and retirement planning firms will understand the needs of the self-employed and small business owners more than Correct Capital. In fact, we were inspired by a self-employed individual, our founder's father (you can discover more about our story here). We have a deep understanding that your business and retirement aspirations extend far beyond just profit, and we are devoted to offering tailored plans that fit your goals. Read on to discover more about your self-employed retirement plan options in Wentzville, MO, or call Correct Capital at 877-930-4015 or fill out our online form to speak to a member of our advisory team at your convenience.
Types of Self-Employed Retirement Plans
There are a few different retirement savings plans available for self-employed individuals, each with its own set of advantages and considerations. A Wentzville, MO financial advisor can help you comprehend the benefits and drawbacks of each option and opt for the most suitable one for your circumstances. Generally, your self-employed retirement plan options in Wentzville, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are personal savings plans that offer specific tax advantages. If you deposit to a traditional IRA, deposits are deducted from your taxable income, and investment earnings grow tax-deferred, but distributions in retirement are subject to income tax. On the other hand, Roth IRA payments are made with money you've already paid taxes on, but qualified distributions in retirement, including investment gains, are tax-free. In both accounts, distributions can be made without penalty if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through an employer, traditional and Roth IRAs are available to 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 portion of of the money they make from their self-employment. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) would not be able to contribute more than the 25% you (the employer) already contributed. If you have employees, you must contribute an equal amount to their pensions. You can either contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be an excellent self-employed retirement plan if your business experiences fluctuating income periods. SEP IRAs don't have the costly startup or administrative fees other retirement plans do.
SEPs work like traditional IRAs, where deposits are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Self-employed individuals and any employer, can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $66,000
For the self-employed individual, the annual contribution limit is decided by 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 sole proprietors or those who only employ a spouse. Solo 401(k)s work about the same as employer-sponsored 401(k) plans, and you can add funds as an employee and on your own behalf as the employer. This offers greater potential for savings than some other retirement savings plans, however the possibility of greater retirement savings is often offset by more limited investment options. In a solo 401(k) plan, you can make either traditional deferrals (with pre-tax money) or Roth deferrals (with after-tax money).
Eligibility: Only sole proprietors and their spouses have access to solo 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 a maximum of 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 benefit to self-employed individuals once they've retired. In contrast to other types of retirement plans, a defined benefit plan doesn't go up and down because of investment gains, but allows self-employed people to have an exact dollar figure as their income in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and are willing to make significant contributions. Contributions are tax deferred and contributions are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs a business where they're the only owner or has less than five employees can establish an individual defined benefit plan, but it's typically only recommended for those over 50 who earn well into the six figures. Typically, good candidates for defined benefit plans are:
- Partners or owners who desire to save more than $66,000 (or $73,500 over age 50)
- Companies already contributing 3-4% who are want to contribute more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who want to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit is decided by an actuary based on your income, age, and retirement goals. Contribution limits change annually.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Wentzville, MO
A financial advisor in Wentzville, MO specialized in self-employed retirement plans can be indispensable for self-employed individuals. They have the knowledge to help you navigate the intricacies of retirement planning and create a tailored strategy that aligns with your goals. A financial planner will analyze your financial situation, adjust for your risk tolerance, and guide you in making informed decisions for yourself, both as a business owner and future retiree. Part of what we do for you includes:
- Help you pick a plan that best fits your needs and goals
- Tailor the plan to your needs even further
- Adopt a written plan that follows all IRS guidelines
- 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
- Maximize your retirement income by increasing your social security benefits
Self-Employed Retirement Plans in Wentzville, MO: Correct Capital's Process
Wentzville, MO business owners without the time, desire, or knowledge to handle their self-employed retirement plan themselves can become burdened when looking at their options. At Correct Capital, our financial advisors handle the lion's share of your retirement planning for you, and strive to make meeting your business and retirement aspirations as easy 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 — It only takes 20 minutes for a member of our advisor team to know if we're suitable for you and your business. This brief introduction allows us to understand what you're looking for with no obligation for you.
- Gather Information — If we seem like a good fit, we'll ask for more info, including how many employees you have (if any), your current finances, and what kind of retirement you want to live. This allows us to put together a personalized plan based entirely on type of advising you need.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and go over your plan in detail to ensure understand how it best correlates to your needs.
- Implementation and Monitoring — Once we've started to move forward, we'll put everything in place so you can start saving. Throughout our relationship, we'll meet with you and adjust your plan so it stays consistent with your needs.
Our financial planners 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 high-quality service to help you achieve your self-employed retirement goals.
Other services we offer in Wentzville, MO include:
Call Correct Capital for Your Wentzville, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Wentzville, MO financial advisors need to offer more than just 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 Wentzville, MO clients our I.O.U. promise: all of the advice we give you will be independent, objective, and unbiased. To get started on your self-employment retirement plan in Wentzville, MO, call Correct Capital today at 877-930-4015 or fill out our online form.
