Self-employed retirement plans in Westwood, MO. The freedom of running your own business in Westwood, MO is a wonderful advantage to working for yourself. But that freedom can be accompanied by limited stability, especially in in regards to building a retirement plan, you don't have an employer who will set up a plan for you. Only 13% of self-employed people have a workplace retirement plan, but many would be better off exploring their options. In addition to a more comfortable retirement, 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.
Not many wealth management and retirement planning firms know what it's like to be self-employed or a small business owner than Correct Capital. Our founder's father was a small business owner himself (you can read more about our story here). We know that your business and retirement goals transcend just profit, and we are committed to providing customized plans that reflect where you are and where you want to go. Continue reading to learn more about your self-employed retirement plan options in Westwood, MO, or call Correct Capital at 314-930-401(k) or contact us online to speak to a member of our advisory team at your convenience.
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 Westwood, MO financial advisor can help you understand the advantages and disadvantages of each option and choose that works best for you. Typically, your self-employed retirement plan options in Westwood, MO include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Arrangements, are investment accounts that provides individuals with tax advantages to save for retirement. If you deposit to a traditional IRA, deposits are typically tax-deductible, and any gains on investments grow tax-deferred, but distributions in retirement are taxed as regular income. In contrast, Roth IRA deposits are made with money you've already paid taxes on, but qualified withdrawals in retirement, including investment gains, are tax-free. In both a traditional an a Roth IRA, withdrawals can be made without extra fees as long as 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 can be set up by 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 share 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, they must receive the same amount you do. You may choose to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs may be a suitable self-employed retirement plan if your business experiences fluctuating income periods. SEP IRAs don't have the high upfront costs or administrative expenses often associated with other retirement plans.
SEPs work like traditional IRAs, where contributions are made with pre-tax money and distributions are taxed as income.
Eligibility: Any employer, including the self-employed, can establish a simplified employee pension plan.
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 amount eligible to be contributed is decided by a unique 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 businesses with no employees or who only employ a spouse. Solo 401(k)s function in the same same way as employer-sponsored 401(k) plans, and you can make contributions as an employee and on your own behalf as the employer. This offers increased savings opportunities than SEPs or IRAs, however the additional opportunities for saving are often counteracted by having less investment options available. In an individual 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 one-participant 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 a maximum 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 provides a a predetermined monthly figure to self-employed individuals once they've retired. In contrast to other types of retirement plans, a defined benefit plan doesn't oscillate based on investment returns, but allows self-employed individuals to know exactly how much they'll get in retirement. This plan is best suited for high-earning self-employed individuals who want to save a a large amount for retirement and want to add substantial contributions. Contributions are tax deferred and withdrawals are taxed at your income level in retirement.
Eligibility: Any self-employed individual who runs a business with no employees besides the owner or has less than five employees can establish an individual defined benefit plan, but it's typically only well-suited for those over 50 who earn well into the six figures. 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 willing to do more
- Companies who are sure of their profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The contribution limit must be determined by an actuary who calculates for 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 valuable asset for self-employed individuals. They have the knowledge to help you navigate the intricacies of retirement planning and implement a tailored strategy that acts as a roadmap through your financial future. A financial advisor will evaluate where your finances currently are, understand 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 choose 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
- 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 as long as you work with us
- Increase your retirement income by increasing 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, 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 bulk of the retirement planning work on your behalf, and attempt to make meeting your retirement goals as easy as we possibly can. 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 20 minutes for one of our advisors to know if we're the best firm to help you reach your goals. This short introduction allows us to get a feel for your needs with no obligation on your part.
- Gather Information — If we both decide to move forward, we'll ask for more info, including the number of employees in your business (if applicable), your current financial situation, and what kind of retirement you want to live. This allows us to put together a personalized plan suited specifically for your needs.
- Review Your Plan — After we put together a plan based on the information you provide, we'll meet with you and discuss the specifics of your plan to ensure it's what you were looking for.
- Implementation and Monitoring — Once we've started to move forward, we'll put everything in place so your savings can start growing immediately. Throughout your time working 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 planners and retirement consultants are fiduciary advisors who have a legal and moral obligation to do what's best for you and only you. We are proud to provide clear communication and high-quality service to help you achieve your self-employed retirement goals.
Other services we offer in Westwood, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
Call Correct Capital for Your Westwood, MO Self-Employed Retirement Plan
Your business isn't "just a business" to you, and your Westwood, MO financial advisors need to offer more than just sage financial advice. Correct Capital enjoys getting to know our clients and their business to deliver personalized self-employed retirement plans. We give all our Westwood, MO clients our 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, speak to a member of our team today at 314-930-401(k) or contact us through our website.
