Self-employed retirement plans in Westwood, MO. The flexibility involved with having your own business in Westwood, MO is a fantastic aspect of being self-employed. But that freedom can be accompanied by uncertainty, particularly in when it comes to building a retirement plan, employer-sponsored plans aren't an option. Only a fraction of self-employed individuals have retirement plans they can contribute to, but many would be better off exploring their options. In addition to setting you up for the retirement of your dreams, working with a financial advisor to set up your self-employed retirement plan in Westwood, MO offers tax benefits that can help you improve your bottom line.
Few financial advisory 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 small business owner, our founder's father (you can discover more about our story on our website). We know that your business and retirement aspirations extend far beyond spreadsheets and percentages, and we are dedicated to providing personalized solutions that fit your goals. Read on to learn more about your self-employed retirement plan options in Westwood, MO, or call Correct Capital at 877-930-4015 or contact us online to speak to a member of our advisory team now.
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What Self-Employed Retirement Plans Are There?
There are many retirement savings options that the self-employed can contribute to, each with its own set of advantages and considerations. A Westwood, MO financial advisor can help you grasp 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 Westwood, MO are comprised of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that provides individuals with tax advantages to save for retirement. In a traditional IRA, deposits are typically tax-deductible, and any gains on investments grow tax-deferred, but withdrawals in retirement are taxed as if it were income. 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, withdrawals are penalty-free if you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are set up through employment, traditional and Roth IRAs are available to anyone with an earned income.
Contribution Limits: For 2023, annual contribution limits 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 percentage of of their annual income from self-employment. Given that you are self-employed, your ability to contribute is restricted to the 25% already contributed by you in your position as the employer. 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 wages to employee accounts. SEP IRAs may be a suitable self-employed retirement plan if your business goes through cycles of high revenue and low revenue. SEP IRAs don't have the costly startup or administrative fees other retirement plans do.
SEPs work like traditional IRAs, where payments are made with money you've yet to pay taxes on and withdrawals are taxed as income.
Eligibility: Any employer, including the self-employed, can set up 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 the self-employed individual, the maximum amount you can contribute in a given year is decided by a special calculation.
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 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 greater potential for savings than SEPs or IRAs, however the possibility of greater retirement savings is often offset by more limited investment options. In a one-participant 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 can establish and contribute to a solo 401(k).
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) which cannot exceed 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 monthly figure to self-employed individuals after they've left the workforce. In contrast to the defined contribution plans mentioned above, a defined benefit plan doesn't oscillate because of investment returns, but allows self-employed people to know exactly what they'll receive in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a substantial portion for retirement and are willing to make substantial contributions. Contributions are tax deferred and withdrawals are taxed at your income level 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 at least $250,000 a year. Those interested in defined benefit plans tend to be:
- Partners or owners who want 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 must be calculated by an actuary based on your income, age, and retirement goals. Contribution limits are adjusted annually.
Why You Need a Financial Advisor for Your Self-Employed Retirement Plan in Westwood, MO
A financial advisor in Westwood, MO specialized in self-employed retirement plans can be a crucial partner for self-employed individuals. They have the know-how to help you understand the complexities of retirement planning and design a personalized approach that acts as a roadmap through your financial future. A financial planner will analyze your financial situation, understand your risk tolerance, and help you make sound 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
- Customize the plan to your needs even further
- Adopt a written plan that follows all IRS regulations
- Arrange a trust plan for assets
- Create a record keeping system
- Help you understand the plan's terms
- Monitor and adjust your plan as needed
- Offer continued financial education and support into and through retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Westwood, MO: Correct Capital's Process
Westwood, MO business owners who don't have the time, interest, or knowledge to handle their self-employed retirement plan themselves can become burdened with the different options available to them. At Correct Capital, our financial advisors handle the lion's share of your retirement planning on your behalf, and attempt to make achieving your business and retirement goals as simple as possible for you. We can help you establish and maintain your self-employed retirement plan in four simple steps:
- Schedule a Call — We only need a short 20-minute call for a member of our advisor team to understand if we're the best firm to help you reach your goals. This brief introduction allows us to understand your needs with no obligation for you.
- Gather Information — If we both decide to move forward, we'll request more info, including the number of employees in your business (if applicable), your current finances, and your retirement goals. This allows us to put together a custom plan suited specifically for your needs.
- Review Your Plan — Once we've compiled your plan, we'll meet with you and go over your plan in detail to ensure you're comfortable with it.
- Implementation and Monitoring — Once we've agreed on your plan, we'll put everything in place so your savings can start growing immediately. Throughout your time partnering with us, we'll meet with you and adjust your plan to ensure it stays suited to your needs.
Our financial planners and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's in your best interest. We are proud to provide transparent communication and high-quality service to assist you reach your self-employed retirement goals.
Other services we offer in Westwood, MO include:
Call Correct Capital for Your Westwood, MO Self-Employed Retirement Plan
Your business isn't merely a business to you, and your Westwood, MO financial advisors need to offer more than simply wise financial advice. Correct Capital enjoys getting to know our clients and what makes them and their business tick to deliver customized self-employed retirement plans. We offer all our Westwood, 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 Westwood, MO, call Correct Capital today at 877-930-4015 or fill out our online form.
