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Roth Solo 401k: A Breakdown and Guide

By   ·  6 minute read

Have you ever heard of a 401k? It’s a retirement savings plan sponsored by an employer, allowing employees to contribute a portion of their paycheck to a retirement account. Many employers will even match a portion of your contributions to grow your retirement savings. But what if you’re self-employed? Just because you’re an independent contractor, small business owner, or even a gig worker doesn’t mean you can’t benefit from the same structure of retirement planning.

A Roth Solo 401k can be a powerful tool for self-employed individuals or small business owners with no employees other than a spouse. You’re allowed to make contributions both as an employee and an employer into your Roth Solo 401k which can mean higher contribution limits than other plans. In this guide, we’ll cover the basics and break down a Roth Solo 401k, solo 401k limits, solo 401k rules, and solo 401k requirements. Whether you’re far into your investment journey or just starting, a Roth Solo 401k might be able to help grow your retirement savings to the next level. 


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What is a Roth Solo 401k?

To understand a Roth Solo 401k, first, we must understand a Solo 401k. A Solo 401k is a retirement plan designed for self-employed individuals or small business owners who want to make pre-tax (traditional) or after-tax (Roth) contributions similar to an IRA, except with higher contribution limits. A Solo 401k has two contributors:

Roth Solo 401k infographic 12.4.25

  • Employee - You
  • Employer - Your business

A Solo 401k allows both you as the employee and your business as the employer to make contributions to the retirement account. A Roth Solo 401k combines the high contribution limits of a Solo 401k with the tax-free growth benefits of a Roth account. Contributions into a Roth Solo 401k are made with after-tax dollars, but any earnings and qualified withdrawals are tax-free. The advantage of tax-free growth can be a powerful tool when planning your retirement accounts.

Why Utilize a Roth Solo 401k?

When compared to other retirement plans, a Roth Solo 401k can offer a variety of different advantages.

1.  Higher Contribution Limits

As of 2026, the contribution limits for IRA accounts are $7,500 for anyone under the age of 50, or $8,600 for those age 50 and older.

For a Roth Solo 401k, the combined employee and employer contribution limit is $72,000, which increases to $80,000 for those 50 and older. Some plans might even allow those aged 60-63 to contribute up to $83,250. 

2.  No Income Limits

Roth IRAs are known for excluding high earners from being able to contribute. As of 2026, if your Modified Adjusted Gross Income (MAGI) is $168,000 or more, you’re unable to contribute to a Roth IRA.

A Roth Solo 401k does not have any income limits, making it an option for high-income individuals who might be ineligible to contribute to a Roth IRA.  

3.  Tax-Free Growth      

Since contributions to a Roth Solo 401k are made with after-tax dollars, any growth inside the Roth Solo 401k is tax-free, and withdrawals in retirement are made tax-free as well.

 

Solo 401k Limits

While there are no income limitations for having a Roth Solo 401k, there are contribution limits that need to be adhered to.

1. Employee Contribution Limits
Whether you’re making Traditional or Roth contributions, the maximum an employee can contribute is $24,500 per year. If you are age 50-59, you can contribute an additional $8,000 per year as a catch-up contribution. Some plans allow for a $11,250 catch-up contribution for those aged 60-63. When you contribute, you can split it between Roth and Traditional in any ratio.

2.  Employer Contribution Limits
Employer contributions are typically pre-tax (Traditional), but as of 2025, many plans now offer employer contributions with after-tax dollars (Roth). Your business can contribute:

  • Up to 25% of net business profit if your business is an S-Corp or C-Corp
  • Up to 20% of net self-employment income if you are self-employed or a single-member LLC. This is after accounting for the IRS adjustment for self-employment tax. 
3.  Combined Solo 401k Contribution Limit

The combined total of employer and employee contributions (across traditional or Roth) is $72,000 as of 2026. This does not include the catch-up contributions allowed for those aged 50-59 or 60-63, depending on your plan.

Solo 401k Rules

Aside from contribution limits, there are also a few important rules to note when it comes to managing your Roth Solo 401k.

  • Income - You must have self-employment income; all contributions must be based on earned income.

  • Employees - Your business cannot have any employees other than you or your spouse. If you hire full-time staff, you may be forced to convert your Solo 401k into a traditional 401k. A spouse who works for the business can contribute to their own Roth Solo 401k.

  • Withdrawals - You might face a 10% penalty and income taxes for any withdrawals made before age 59 ½.

  • RMDs - You must begin taking Required Minimum Distributions (RMDs) at age 73

  • Loans - You are allowed to take a loan and borrow up to 50% of your account value to a maximum of $50,000. Loans are required to be repaid within 5 years. Failure to do so may be subject to taxes and penalties.

  • Establishment deadline - The plan for your Roth Solo 401k must be established by December 31st of the tax year you wish to contribute.

  • Employer contribution deadline - Any employer contributions are allowed to be made up to your tax filing deadline. This includes extensions.

  • 5500-EZ - If your plan’s assets exceed $250,000 at the end of the year, the IRS requires you to file a Form 5500-EZ annually (even if you stop contributing). Failure to file this form can result in penalties.

It’s important to consult with financial or tax professionals when planning or managing your Roth Solo 401k to make sure IRS rules are adhered to and followed to avoid fines.  

 

Solo 401k Requirements

If a Roth Solo 401k sounds like something you might be able to utilize when planning your financial future, it’s important to ensure you qualify and meet eligibility requirements.

Earned Self-Employment Income

You must have earned self-employment income to contribute to a Roth Solo 401k. Some different types of eligible income include:

  • 1099 earnings
  • Sole proprietor profits
  • Single-member LLC income
  • S-Corp owner salary/distributions
  • Freelance/gig work
  • Side-hustle income

            When setting up a Roth Solo 401k with your business, your business must have profit to

justify contributions.

No Employees

Your business is only allowed to have you or your spouse as an employee. As mentioned, your spouse can contribute to their own Roth Solo 401k.

Business Structure

When setting up your Roth Solo 401k plan, you must have a legitimate business structure. This can include:

            It might sound intimidating to have a business set up, but even Uber driving or tutoring

can qualify for a Roth Solo 401k.

Plan Document

A Roth Solo 401k requires a written plan document. This document defines contributions, establishes the rules of the plan, and identifies the administrator (most likely you). When you work with a custodian to establish your Roth Solo 401k this is typically included during setup.

Roth Solo 401k Investment Options

A Roth Solo 401k offers a wide range of investments and the ability to diversify into just about anything to build your retirement account. Stocks, bonds, mutual funds, and ETFs are common investments found inside a Roth Solo 401k. Some plans allow you to self-direct your Roth Solo 401k, enabling you to invest in a wide variety of alternative assets and diversify your portfolio as you see fit. Some common alternative investments include:

Real Estate Yellow
Real Estate (Options such as trust deed investments, Real Estate Investment Trusts (REITS), or even owning a rental property)

Gold Bars Yellow
Precious Metals (Allowing you to invest in gold, silver, platinum, and palladium)

 

Digital Currency
Cryptocurrency (Assets such as Ethereum or Bitcoin)



Company Yellow
Private Placements (Investing in private equity funds, privately held companies, or even venture capital)


Loan money
Promissory Notes (Lending funds to a business or an individual in exchange for interest payments)


Oil

Oil and Gas (Investing in oil, gas, or minerals)


When deciding what to invest in with your Roth Solo 401k it’s important to do your due diligence on both the investment and the company/firm offering the investment.

How do I get started?

You’ve done your research, and you’re ready to utilize a Roth Solo 401k to build your retirement funds. The most important step is to do your due diligence on a provider who can offer and set up a Roth Solo 401k plan for you. This can be a bank, brokerage, or financial services company, such as a custodian. Be sure to evaluate any fee structure or rules they may have to find the right fit for how you want to grow your retirement account. The provider you choose, along with consulting with a tax professional, will allow you to keep your Roth Solo 401k compliant with IRS regulations.

Before speaking with a provider to set up your Roth Solo 401k, it can be helpful to collect a history of your business's financials, as contribution limits are based on your business’s income. Once you’re set up with a provider, you’re ready to start investing and harnessing the strategy of a Roth solo 401k.

In Conclusion

Just because you work for yourself doesn’t mean you can’t plan for your future. Whether you’re a small business owner, driving for Uber, or even a real estate agent, a Roth Solo 401k can be a helpful tool to plan for your retirement while minimizing taxes. Thanks to the high contribution limits and flexible rules, the Roth Solo 401k can be more advantageous than other retirement accounts when used correctly.

Whether you’re looking to give your savings an extra boost or plan a new tax strategy, a well-structured Solo 401k can completely reshape your financial outlook.


 


 

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