| Comparison of Roth Solo 401(k), Roth IRA, and Pre-tax Solo 401(k) |
| Characteristic | Roth Solo 401k Account | Roth IRA | Pre-Tax Solo 401(k) |
| Contributions | Employee (salary deferral) contributions are made with post-tax dollars. | Roth IRA contributions are made with post-tax dollars. | Employee (salary deferral) and/or employer (profits sharing) contributions are made with pre-tax dollars. |
| Income Limits | No income limitation to contribute. | Income limits: married $183,000/single $125,000 modified AGI for 2012 | No income limitation to contribute. |
| Maximum Elective Contribution | Aggregate* employee (salary deferral) contributions limited to $18,000 in 2016 plus an additional $6,000 for employees age 50 or over. | Contribution limited to $5,500 for 2016 plus an additional $1,000 for employees age 50 or over. | Same aggregate* limit as Designated Roth Solo 401(k) Account; however, participant can also make a profit sharing (employer) contribution. |
| Taxation of Withdrawals | Withdrawals of contributions and earnings are not taxed provided it’s a qualified distribution – the account is held for at least 5 years and made:- On account of disability,
- On or after death, or
- On or after attainment of age 59½.
| Same as Roth Solo 401k Account and can have a qualified distribution for a first time home purchase. | Distributions of contributions and earnings are subject to Federal and most State income taxes. |
| Required Distributions | Distributions must start no later than age 70½, unless still working and not a 5% owner. | No requirement to begin making distributions while owner is alive. | Same as Roth Solo 401k Account. |
| * This limitation is by individual, rather than by Solo 401k plan. Although permissible to split the annual employee (salary deferral) contribution between designated Roth Solo 401k contributions and pre-tax Solo 401k contributions, the combination may not exceed the deferral limit – $18,000 ($24,000 if you’re eligible for catch-up contributions). |
