| 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 $206,000/single $139,000 modified AGI for 2020 |
No income limitation to contribute. |
| Maximum Elective Contribution |
Aggregate* employee (salary deferral) contributions limited to $19,500 in 2020 plus an additional $6,500 for employees age 50 or over. |
Contribution limited to $6,000 for 2020 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 72. |
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 – $19,500 ($26,000 if you’re eligible for catch-up contributions). VISIT HERE, to read the top 10 differences between a Roth IRA and a Roth Solo 401k, and CLICK HERE TO VIEW educational video. |
