Last Updated 2/6/2023
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:
| No income limitation to contribute. |
Maximum Elective Contribution | Aggregate* employee (salary deferral) contributions limited to $22,500 in 2023; $20,500 in 2022; $19,500 in 2021 (plus an additional $6,500 in 2022 and 2021 for employees age 50 or over; additional $7,500 in 2023 for employees age 50 or over). | CContribution limited to $6,500 plus an additional $1,000 for employees age 50 or older in 2023; $6,000 plus an additional $1,000 for employees age 50 or over in 2021 and 2022. | 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:
| 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 73; however, No RMDs apply in 2024 and later years. | No requirement to begin making distributions while owner is alive. | Distributions must start no later than age 73 |
* This limitation is by individual, rather than by plan. You can split your annual elective deferrals between designated Roth solo 401k contributions and traditional pre-tax solo 401k contributions, but your combined contributions can’t exceed the deferral limit – $22,500 in 2023; $20,500 in 2022; $19,500 in 2021 ($30,000 in 2023; $27,000 in 2022; $26,000 in 2021 if you’re eligible for catch-up contributions). CLICK HERE TO VIEW educational video. |