The Roth Solo 401(k) Explained

If you’re a freelancer, consultant, or small business owner, you may want to consider opening a Roth Solo 401(k) as a tax-advantaged retirement savings option. This unique retirement account offers a combination of traditional 401(k) and Roth IRA benefits, allowing you to contribute to your retirement savings on a tax-deferred or tax-free basis, depending on the type of contributions you make.

Key Points:

• Contribute up to $19,500 (or $26,000 if you’re 50 or older) in employee elective deferrals for 2023
• Employer profit-sharing contributions can be made on a tax-deferred basis
• Withdrawals in retirement are tax-free if certain conditions are met

Who should consider opening a Roth Solo 401(k)?

If you are self-employed or own a small business with no full-time employees (other than a spouse), the Roth Solo 401(k) can be a great retirement savings vehicle for you. It allows for higher contribution limits compared to traditional IRAs and Roth IRAs, giving you the opportunity to save more for retirement on a tax-advantaged basis.

Consult with a financial advisor or tax professional to determine if a Roth Solo 401(k) is the right choice for your retirement savings strategy.