Solo 401k Webinar - Deep Dive Compare Self-directed Roth 401k VS. Roth IRA

Solo 401k Webinar – Deep Dive Compare Self-directed Roth 401k VS. Roth IRA

October 23, 2020 | By George Blower

Last Updated November 22, 2023

Please check out our webinar for an in-depth discussion of the differences between self-directed Roth 401k vs. Roth IRA.

Roth 401k vs Roth IRA

Technical Differences
Practical Considerations
How to get more info about your situation

Compare Roth IRA vs. Roth Solo 401k

For 2023 & 2024 the contributions limits have been updated to the following:

For Roth IRA

2023 = $6,500 plus $1,000 catch-up contribution if age 50 or older.

2024 = $7,000 plus $1,000 catch-up contribution if age 50 or older.

For Roth Solo 401k

2023 = $22,500 plus $7,500 if age 50 or older. Up to $66,000 or $73,500 if the plan allows for Mega Backdoor Roth Solo 401k.

2024 = $23,000 plus $7,500 if age 50 or older. Up to $69,000 or $76,500 if the plan allows for Mega Backdoor Roth Solo 401k.

Compare Roth IRA vs. Roth Solo 401k

Important: Starting in 2023 Roth Solo 401k funds are no longer subject to required minimum distributions as a result of the passage of the SECURE 2.0 Act.

Compare Roth IRA vs. Roth Solo 401k

Compare Roth IRA vs. Roth Solo 401k

Compare Roth IRA vs. Roth Solo 401k

Roth IRA vs. Roth 401k –
Practical Considerations

Am I self-employed? Do I have full-time employees in my business? Roth Solo 401k:
- Must be self-employed with no full-time w-2 employees
- Roth IRA:
- No self-employment requirement
- An owner of a business with full-time employees is eligible

Do I want to make high contributions?
- Roth Solo 401k:
  - For 2023:
    - $22,500 or $29,000 (if age 50 or older)
    - Up to $73,500 or $63,500 if plan allows for Mega Backdoor Roth
- Roth IRA:
  - For 2023:
    - $6,500
    - $7,500 (if age 50 or older)

Will I need money before I retire?
- Roth Solo 401k:
  - Non-qualified Roth 401k Distribution – taxes on the gains
  - Solo 401k participant loan up to 50% of the balance not to exceed $50,000
- Roth IRA:
  - Non-qualified Roth IRA Distribution – no taxes on the contributions
  - Loan is not allowed

Am I 72 years of age or older?
- Roth Solo 401k:
  - No Required Minimum Distributions starting in 2023
  - May rollover to Roth IRA
- Roth IRA:
  - No Required Minimum Distribution

Do I want to invest in alternative investments?
- Roth Solo 401k:
  - Self-directed Solo 401k provider
  - Direct Checkbook Control
  - UBIT/UDFI exception for income from debt-financed real estate investment
- Roth IRA:
  - Specialty Trust Company/Provider
  - Checkbook Control via Roth IRA LLC
  - No UBIT/UDFI exception for income from debt-financed real estate investment