The Roth component of a solo 401k plan for the self-employed is just that, a component. There is no such thing as a standalone Roth Solo 40l(k). Therefore, when a self-employed individual looks to have a Roth solo 401k, the self-employed business must sponsor a solo 40l(k) plan that offers a Roth component. Not all solo 401(k) providers offer plans that include the Roth solo 401k component.
Roth Solo 401(k) Qualified Distributions
As with Roth IRA distributions, once a Roth solo 40 l(k) distribution is qualified,” it will come out of the plan tax and penalty free. The rules for qualified solo 401k distributions are almost the same as the rules for qualified Roth IRA distributions.
- The Roth solo 401(k) must have been established for 5 years, and
- the distribution must be made after attaining age 59½; OR
- The distribution is due to the death of the solo 401k plan participant; OR
- The distribution is due to the disability of the solo 401k plan participant.
Matt made his first deferral to his Roth solo 401(k) in 2011. In 2017, Matt is 61 and he decides to take distributions from his Roth solo 401k component. Matt is able to take a qualified distribution from his Roth solo 401(k) balance since he is over the age of 59½ and established his Roth solo 401k component more than 5 years ago. Any distributions Matt takes from his Roth solo 401(k) will be income tax and penalty free.