Self-employed retirement plans Worcester, MA. The freedom of being your own boss in Worcester, MA is one of the best aspects of being self-employed. Even so, this flexibility sometimes brings with potential drawbacks, particularly regarding planning for retirement, since you don't have the benefit of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many should consider exploring their options. In addition to achieving a more secure retirement, working with a financial advisor in Worcester, MA to establish your self-employed retirement plan delivers significant tax advantages that enable both you and your business to thrive.
Few Worcester, MA investment consulting and retirement planning firms understand the needs of small business owners quite like Correct Capital. Our company’s founder grew up with a father who was a small business owner himself (learn more about our story here), and we have a rich history of assisting business owners in their retirement planning needs. We know that your business and retirement aspirations aren’t limited to simple financial figures, and we are dedicated to create tailored solutions aligned with your vision. Keep reading to learn more about your self-employed retirement plan options in Worcester, MA, or call Correct Capital at 877-930-401k or contact us online to speak with a small business financial advisor in Worcester, MA today.
Why Worcester, MA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also provide tangible benefits today. From flexible contributions to substantial tax savings, partnering with a financial advisor in Worcester, MA allows you to customize your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
If your income changes annually, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to adjust how much you save:
- Customizable Contributions: Set aside more during high-income years and scale back when income is lower, so your plan aligns with your cash flow.
- Roth Options: A Roth Solo 401(k) lets you pay taxes on contributions now, so you can withdraw your savings tax-free down the road—an advantageous choice if you expect your tax rate will increase in the future.
Save Money on Taxes
Retirement plans for self-employed individuals offer powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a Solo 401(k) lower your taxable income, so you can keep more of your hard-earned money.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, which gives your money more time to compound.
- State-Specific Incentives: Depending on where you live, you might access additional deductions as a self-employed individual. These regional incentives can make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Qualified participants can take advantage of a credit of up to 50% of the first $2,000 put into a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement requires more than how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across varied stocks, bonds, and alternatives serves to mitigate financial risk while helping to grow your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund prevents you from dipping into savings during financial hardships and risking extra costs.
Plan for the Future of Your Worcester, MA Business
A thoughtful retirement strategy enables you to prepare for what’s next with your Worcester, MA business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s stay in your name and won’t be included in the sale. These plans can provide the reliable income you’ll need during retirement. It’s important to note that while selling a business often leads to a capital gain, deposits into these plans are subject to yearly maximums (e.g., up to $7,000 for IRAs or up to $70,000 for Solo 401(k)s, with catch-up contributions, depending on plan details).
- Minimizing Taxes: Using retirement contributions wisely can reduce the taxes you are required to pay when you sell your business.
- Succession Planning: If you’re passing the business on, your retirement savings offer a stable foundation through the transition. You may also seek advice from a financial advisor experienced in both succession and retirement strategies to minimize tax burdens associated with the transaction.
With the right retirement plan, you gain control over your financial future, reduce your tax burden, and build a secure foundation for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Worcester, MA Now?
Time is one of the most crucial resources for building your retirement fund. Getting a head start not only allows you to build a bigger financial cushion but also reduces the stress of saving aggressively in the future. This is why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings may cause a substantial impact on the total you’ll have when you retire. The main reason is compound interest—the financial principle where your investments grow, and those returns, then, generate even more returns. The longer your money has to grow, the more significant the impact of this compounding process.
Example: Taylor and Alex are both self-employed professionals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex initiates savings of $5,000 annually at age 30.
- Taylor delays savings until age 40 but puts away $7,500 annually to catch up.
By age 65, with an assumption of 7% annual return:
- Alex puts in $180,000 and ends up with $691,184.39*.
- Taylor contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Small, consistent savings contributed over time can lead to substantial growth. Consider this example showing the effect of compounding:
- 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: Contributing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
Saving early, the less effort required each year to achieve your retirement goals.
*These calculations are estimates calculated using NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. These calculations involved multiplying yearly deposits by the years contributed. 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 your unique situation. We recommend consulting a financial advisor for custom recommendations.
Take Control of Your Financial Future
If you’re self-employed in Worcester, MA, it can be tempting to prioritize reinvesting in your business rather than saving for retirement. Even so, initiating a plan now enables you to:
- Take advantage of tax-deferred growth or withdrawals without taxes in the future.
- Enjoy contribution flexibility that change with your income.
- Build a financial cushion that offers peace of mind, no matter how your business changes.
Getting started now, the less you’ll have to worry about catching up later in life. Saving for retirement now means taking control of your financial future and giving yourself the freedom to focus on your dreams—both for your future retirement and your Worcester, MA business.
Types of Self-Employed Retirement Plans
Multiple retirement savings options available for entrepreneurs in Worcester, MA, each with its own benefits and trade-offs. A financial advisor can help you learn about the advantages and disadvantages of each plan and identify the one best suited for your needs. Typically, your self-employed retirement plan options in Worcester, MA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are financial tools for retirement that provide key tax perks. In a standard IRA, the money you contribute is often tax-deductible, and earnings grow without immediate taxation, but money taken out during retirement are taxable. In contrast, with Roth IRAs, you contribute from post-tax earnings, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, traditional and Roth IRAs are open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 for those aged 50+.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that allows those who are self-employed 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) have designated. If you have employees, it's required to contribute the same amount for them as you do for yourself. You may choose to contribute a fixed dollar figure or a percentage of wages to employee accounts. This type of plan may be ideal for entrepreneurs facing fluctuating revenue streams. In contrast to some alternatives, SEP IRAs are free of the high fees associated with starting or maintaining other plans.
SEPs function like traditional IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
Eligibility: Employers of any type, including self-employed individuals can establish a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
For self-employed individuals, the allowable contribution is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), also called an Individual 401(k) or one-participant 401(k) plan, is a savings option for the self-employed intended for companies that have no employees or when the sole employee is your spouse. This type of plan function similarly to standard 401(k) plans, and enable contributions as both an employer and an employee with pre-tax money. This provides more savings than SEPs or IRAs; however, the extra savings options can be balanced by more restricted investment choices. Using a solo 401(k), you can make either traditional or Roth deferrals, which share the same tax benefits as their IRA contribution counterparts.
Eligibility: Solo 401(k)s are available solely to business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: As a self-employed individual with a solo 401(k) plan, you have the ability to make two types of contributions:
- Employee contributions of up to 100% of your self-employment income, capped at the annual contribution limit. In 2025, those limits are $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) are limited to 25% of your net earnings from self-employment, which is calculated as net profits less half of your self-employment tax and the elective deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 for those aged 50 and older (as of 2025), $81,250 for individuals turning 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan offers a structured retirement solution that provides a fixed, predetermined benefit to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but enables participants to determine the precise amount they'll get in retirement. This strategy is ideal for higher-income entrepreneurs who want to save a significant sum for retirement and can commit to making larger deposits. Contributions offer tax-deferred growth, and withdrawals are taxable as income in retirement.
Eligibility: Entrepreneurs managing a one-person company or employing fewer than five people can open an individual defined benefit plan, but it's most commonly recommended for those over 50 who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans are:
- Business owners or partners who want to invest more than $70,000 (or $77,500 for individuals 50 and older)
- Businesses currently investing 3-4% but are open to increasing contributions
- Businesses with proven consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or increase their retirement contributions rapidly
Contribution Limits: The maximum allowable contribution is calculated by an actuary determined by your income, age, and retirement goals. Limits on contributions change annually.
The Importance of a Financial Advisor in Worcester, MA for Your Self-Employed Retirement Plan
Partnering with an advisor in Worcester, MA experienced with retirement plans for the self-employed is an important asset for self-employed individuals. They have the expertise to help understand the intricacies of saving for retirement and craft a personalized approach that aligns with your goals. A financial advisor in Worcester, MA will evaluate your financial situation, identify your risk preferences, and guide you in choosing wisely about saving and investing for retirement. A key part of what we do for you features:
- Assist in selecting a plan that best fits your needs and goals
- Further adapt the plan to your needs even further
- Formalize a plan in writing in accordance with IRS guidelines
- Arrange a trust plan for assets
- Help you understand the plan's terms
- Track and fine-tune your plan when necessary
- Provide ongoing education and advice as you continue on the road to retirement
- Increase your retirement income by making the most of your social security
Self-Employed Retirement Plans in Worcester, MA: Correct Capital's Process
Worcester, MA business owners who aren’t equipped with the time or understanding to oversee their own retirement planning themselves may end up overwhelmed by their choices. Through our team at Correct Capital, our Worcester, MA financial advisors take on the lion's share of your retirement strategy for you, and strive to ensure meeting your financial objectives as easy as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can determine if our services align for you and your business. This initial call helps us get a sense of your goals with zero commitment or extensive time commitment on your part.
- Gather Information: Should we agree to proceed, we'll ask for information, including whether you have employees, your existing financial picture, and your retirement goals. This enables us to craft a tailored approach suited specifically for your needs.
- Review Your Plan: After we put together a plan based on the information you provide, we'll sit down with you and review your plan in detail to make sure it's clear and explain its fit to your circumstances.
- Implementation and Monitoring: When we finalize on your plan, we'll implement the necessary steps so you can initiate your savings journey. As time goes on, we'll have regular meetings and review your strategy to ensure it stays suited to your needs.
Our Worcester, MA financial advisors and retirement plan consultants serve as fiduciary advisors, meaning they are legally and ethically bound to act in your best interest.
Other financial advisory services we offer in Worcester, MA include:
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
Call Correct Capital for Your Self-Employed Retirement Plan in Worcester, MA
Your business isn't "just a business" to you, and your Worcester, MA financial advisors should provide more than simply sound financial advice. Correct Capital takes pride in, we take the time to get to know our clients and their businesses to create tailored self-employed retirement plans. We offer all our Worcester, MA clients our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
