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Roth Solo 401(k)

Self-Directed Roth Solo 401(k)

The Roth Solo 401(k) (also known as the Roth Individual 401(k)) is available to anyone with a Solo 401(k). It’s a benefit to higher-paid employees and self-employed individuals who may have been excluded from having a Roth IRA because of income limitations.

The Roth Individual 401(k) possesses the same benefits of the Individual 401(k) (higher contribution limits than other accounts), with the tax benefits of the Roth IRA. The contribution limits are the same as the Individual 401(k), but you can designate your contributions through salary deferral as Roth contributions.


Details about the Solo 401(k), SEP and SIMPLE IRA plans, contribution and potential deduction amounts, eligibility, and income requirements

Potential Benefit of the Roth Individual 401(k): Higher Contribution Limits

In 2019 you can annually contribute up to $19,000 and up to $25,000 if you’re 50 or over through salary deferral. Plus, you can contribute a profit-sharing portion (0-25%) of your salary. In 2019 the limit from both sources is $56,000 ($62,000 if you are 50 or over).

In 2020 you can annually contribute up to $19,500 and up to $26,000 if you’re 50 or over through salary deferral. Plus, you can contribute a profit-sharing portion (0-25%) of your salary. In 2020 the limit from both sources is $57,000 ($63,500 if you are 50 or over).


Eligibility Requirements

Like the Individual 401(k), The Roth Individual 401(k) is for incorporated and unincorporated businesses, sole proprietorships, partnerships, and corporations. The only requirement for contributions to this plan is that you receive a salary or wage.

The business entity must have no additional employees other than the spouse of the proprietor—or, in the case of a partnership, the only employees must be self-employed partners and their spouses.

An Individual 401(k) plan must be the only arrangement maintained by the business that is not included as part of a controlled group under federal tax law.

Deadline

The deadline for establishing an Individual 401(k) plan is the last day of your business’s tax year (December 31, for a calendar tax year).

However, if your business is incorporated, you may want to establish an Individual401(k) plan early in the tax year to make employee salary deferrals based on the Form W-2 income throughout the year.

This is necessary because you may not defer on compensation that is paid to you from your corporation before you establish the Individual 401(k) plan.


If you’re interested in opening a Roth Solo 401(k), or for more information about this plan, please contact a Senior Account Executive at 440.276.4604.

Self-Directed Solo 401(k) FAQs

In this session, you’ll learn about:

  • Self-Directed Solo 401(k)s and Your Investment Options
  • Contributing to a Solo 401(k) and the Contribution Limits
  • Solo 401(k) Eligibility
  • Solo 401(k) Rules and Regulations
  • Potential Advantages of a Solo 401(k) or Roth Solo 401(k)

2019-2020 Contribution Limits

IRA Contribution Limits, Catch Up Provisions and Contribution Deadlines

2020 IRA Contributions & Deductions Infographic

Infographic summarizing IRS contribution limits and catch up provisions for retirement accounts

Learn More