Self-employed retirement plans Worcester, MA. The independence of owning your own business in Worcester, MA is one of the greatest advantages of having a self-directed career. That said, this freedom sometimes brings with potential drawbacks, especially when it comes to building your retirement fund, because you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many would be better off understanding their retirement options. In addition to achieving a more secure retirement, seeking advice from a financial advisor in Worcester, MA to establish your self-employed retirement plan delivers significant tax advantages that allow your business to grow and succeed.
Few Worcester, MA investment consulting and retirement planning firms are as attuned to the requirements of self-employed individuals quite like Correct Capital. Our founder's father was a small business owner himself (learn more about our story here), and our firm are deeply experienced in supporting entrepreneurs with their retirement planning needs. We know that your goals for your business and retirement go far beyond just monetary concerns, and we strive to create personalized solutions to meet your unique goals. 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 talk to a entrepreneurial financial advisor in Worcester, MA today.
Schedule a Meeting With an Advisor Today
Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
Schedule a 15-Minute Introductory Call
Why Worcester, MA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals are essential for preparing you for the future, they also provide immediate benefits today. Offering flexibility in contributions to considerable tax savings, partnering with a financial advisor in Worcester, MA allows you to design your retirement plan to suit your individual circumstances.
Flexibility That Fits Your Income
For those with fluctuating income annually, a plan like a SEP IRA or Solo 401(k) provides the option to adjust how much you save:
- Customizable Contributions: Set aside more during profitable years and cut back when income is lower, so your plan works with your current income.
- Roth Options: A Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw tax-free later—a wise move if you anticipate your tax rate is likely to rise in the future.
Save Money on Taxes
Retirement plans for self-employed individuals provide powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA shrink your tax liability, allowing you to keep more of your income.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to compound.
- State-Specific Incentives: In some states, you might access state-specific credits as a business owner. These regional incentives can make these plans even more valuable.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 contributed a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future isn’t only about how much you save—it’s also linked to the way you invest:
- Diversified Portfolios: Allocating your investments across varied stocks, bonds, and other assets is a smart way to minimize exposure to risk while still growing your nest egg.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund ensures you don’t dipping into savings during challenging periods and risking extra costs.
Plan for the Future of Your Worcester, MA Business
Preparing for retirement enables you to think through what’s next with your Worcester, MA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain your personal assets and are not part of the sale. These plans ensure the steady income you’ll need in the future. Remember that while the sale of a business usually creates a capital gain, retirement plan contributions are capped at annual limits (e.g., a maximum of $7,000 for IRAs or a maximum of $70,000 for Solo 401(k)s, with catch-up contributions, based on plan compensation).
- Minimizing Taxes: Strategically planning your contributions can reduce the taxes you might face when you sell your business.
- Succession Planning: For those winding down or handing over their business, your retirement savings ensure the funds you need during the change. You might want to seek advice from a financial advisor experienced in both succession and retirement strategies to minimize tax burdens associated with the transaction.
With the proper savings strategy, you manage your financial future, reduce your tax burden, and create a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Worcester, MA Now?
Time remains one of the most important resources in retirement planning. Getting a head start not only lets you accumulate a bigger financial cushion but also lowers the pressure of saving aggressively in the future. Here’s why it makes sense to begin today:
The Cost of Waiting
Delaying your retirement savings can have a significant impact on the savings you’ll have when you stop working. The primary reason is compound interest—the concept where your investments grow, and those returns, then, generate even more returns. The more time your money has to grow, the greater the effect of this compounding process.
Example: Alex and Taylor are both self-employed individuals. They each aim to save $500,000 for retirement by age 65:
- Alex starts saving $5,000 annually at age 30.
- Taylor waits until age 40 but saves $7,500 annually to catch up.
By age 65, assuming 7% annual return:
- Alex puts in $180,000 and achieves a total of $691,184.39*.
- Taylor contributes $195,500 but only ends up with $474,367.78*.
How Early Contributions Grow
Even modest contributions contributed over time may result in substantial growth. Consider this example showing the power of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an expected yearly growth rate of 7%, you’ll accumulate $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month yields only $235,412.97* by age 65—a shortfall of over $260,000, simply due to a 10-year delay.
The earlier you begin, the less effort required each year to meet your retirement goals.
*The figures provided in this example represent estimates calculated using NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. The contributions were calculated by multiplying the annual deposit amount by the total number of years contributions were made. The scenarios provided are for illustrative purposes only and cannot predict actual future outcomes. Actual results may vary based on elements like market conditions, fees, and personal factors. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
If you’re self-employed in Worcester, MA, it is often the case that you focus more on reinvesting in your business over saving for retirement. Even so, starting a plan now gives you the chance to:
- Benefit from tax-free future growth or withdrawals without taxes later on.
- Take advantage of contribution flexibility that adapt to your income.
- Establish a safety net that offers peace of mind, no matter how your business changes.
Getting started now, the less you’ll have to worry about making up for lost time later in life. Building your retirement savings today means gaining control over your financial future and giving yourself the ability to concentrate on your objectives—both for your retirement years and your Worcester, MA business.
Types of Self-Employed Retirement Plans
There are several retirement savings options open for those working for themselves in Worcester, MA, each offering its own benefits and trade-offs. A financial advisor is available to help you understand the benefits and drawbacks of each plan and identify the one most suitable for your needs. Generally speaking, your self-employed retirement plan options in Worcester, MA consist of:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that offer distinct tax benefits. In a conventional IRA, the money you contribute is often tax-deductible, and returns grow free of current taxes, but retirement distributions are subject to income tax. In contrast, Roth IRA contributions using income already taxed, but retirement withdrawals that qualify, including earnings, are exempt from taxes. In both accounts, withdrawals don’t incur penalties provided you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, both traditional and Roth IRAs are available to anyone with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: A Simplified Employee Pension (SEP) IRA is a retirement plan that permits those who are self-employed to set aside a portion of their self-employment income. Contributions must come from an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role beyond 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 have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. SEP IRAs is a good option for entrepreneurs facing fluctuating revenue streams. Unlike other plans, SEP IRAs don’t have the high fees associated with starting or maintaining other plans.
SEPs function like conventional IRAs, where the contributions are tax-deferred and withdrawals are taxed as income.
Eligibility: Both employers and 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
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: Solo 401(k)s, 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 without employees or when the sole employee is your spouse. These plans are similar to employer-sponsored 401(k) plans, and let you make contributions as both an employee or an employer with pre-tax money. This provides more savings versus SEPs or IRAs; however, the additional opportunities may be offset by more constrained investment avenues. In a solo 401(k) plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up 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 earned income from self-employment, capped at the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Employer profit-sharing contributions (as an employer) are limited to 25% of your adjusted self-employment income, which is defined as net profit minus half of your self-employment tax and the deferrals you made.
Your combined contributions must not surpass $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: A defined benefit plan is a retirement option that provides a fixed, predetermined benefit to self-employed individuals upon retirement. Unlike defined contribution plans mentioned above, investment returns don’t affect the payout, but allows self-employed individuals to know the precise amount they'll receive in retirement. This plan is best suited for wealthier entrepreneurs who want to save a substantial amount for retirement and can commit to making sizeable contributions. Contributions offer tax-deferred growth, and withdrawals are taxable as income upon retirement.
Eligibility: Self-employed professionals managing a one-person company or employing fewer than five people are eligible to open an individual defined benefit plan, but it's typically suggested for those over 50 who earn at least $250,000 a year. Generally, good candidates for defined benefit plans are:
- Partners or owners who aim to deposit more than $70,000 (or $77,500 for those aged 50+)
- Organizations that already put in 3-4% and are willing to do more
- Organizations with proven consistent profit patterns
- Entrepreneurs over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The maximum allowable contribution requires calculation from an actuary determined by your financial situation, age, and savings targets. Allowable contributions are updated yearly.
The Importance of a Financial Advisor in Worcester, MA for Your Self-Employed Retirement Plan
A financial advisor in Worcester, MA specialized in self-employed retirement plans can be an invaluable resource for entrepreneurs. They offer the knowledge to assist guide you through the challenges of retirement planning and design a personalized approach that aligns with your goals. Your 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. Included in what we do for you features:
- Guide you in choosing a plan that aligns with your objectives and circumstances
- Tailor the plan to fit you personally even further
- Create a written plan that complies with IRS regulations
- Organize a trust plan to manage your assets
- Make sure you understand the plan's terms
- Monitor and adjust your plan when necessary
- Provide ongoing education and advice to help you navigate your retirement journey
- Increase your retirement income by optimizing your social security benefits
Self-Employed Retirement Plans in Worcester, MA: Correct Capital's Process
Entrepreneurs in Worcester, MA who don’t have the time or expertise to handle their retirement savings strategy themselves may end up overwhelmed as they look at their available plans. At Correct Capital, our Worcester, MA financial advisors handle the lion's share of your savings plan setup for you, to help make meeting your financial objectives as hassle-free as possible for you. We will guide you in creating your self-employed retirement plan in four simple steps:
- Schedule a Call: In just 20 minutes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction allows us to learn about your needs with zero commitment or major time investment on your part.
- Gather Information: Should we agree to proceed, we'll request information, including your employee count, your existing financial picture, and your future objectives. This enables us to craft a personalized strategy designed just for you.
- Review Your Plan: After we put together a plan based on the information you provide, we'll sit down with you and discuss your plan in detail to help you fully grasp it and show how it aligns with your goals.
- Implementation and Monitoring: Once we've agreed on your plan, we'll put everything in place so you can begin contributing. As time goes on, we'll meet with you and track your progress to make sure it remains aligned with your goals.
Our Worcester, MA financial advisors and retirement plan consultants serve as fiduciary advisors, who are obligated to they are committed by law and ethics to do what's in your best interest.
Other financial advisory services we offer in Worcester, MA include:
- 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 Worcester, MA
Your business isn't "just a business" to you, and your Worcester, MA financial advisors must deliver more than simply sound financial advice. Correct Capital takes pride in, we make it a priority to understand our clients and their businesses to provide personalized self-employed retirement plans. To every client in Worcester, MA, we provide our I.O.U. promise: everything we recommend will be independent, objective, and unbiased. To get started on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
