Solo 401k Daily Question – Can I contribute to both Roth IRA and Mega Backdoor Roth Solo 401K?

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QUESTION: I have a Roth IRA at Fidelity. If I make mega backdoor contributions to the Solo 401k, will that impact my solo 401k since I already have a Roth IRA?

It will not as you can have both a Roth IRA and a Solo 401k plan.

There’s nothing about having a solo 401(k) that would prevent you from maintaining a Roth IRA or vice versa.

What some solo 401k owners do is make a mega backdoor Roth solo 401(k) contribution to their Solo 401k plan and then transfer the funds to a Roth IRA.

Mega Backdoor Roth Solo 401k is really the industry terminology or jargon for what is technically a voluntary after-tax contribution. 

In order to execute such a transfer, an eligible small business owner (i.e. self-employed individual with no non-owner/non-spouse full-time w-2 employees) would need to set up a Solo 401k plan through a provider (like us) that offers a Solo 401k plan that allows for voluntary after-tax contribution as well as in-service distribution/rollover of such voluntary after-tax funds.

For example, we help our clients set up the required separate voluntary after-tax subaccount (e.g. at the bank or brokerage of their choice) as well as handle the preparation and submission of the required 1099-R to report the subsequent transfer of such voluntary after-tax funds to either a Roth Solo 401k or Roth IRA.

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About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>


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