Solo 401k With Roth Option: Everything You Need to Know

As self-employment surges and owner-only ventures multiply, retirement solutions must accommodate variable incomes and ambitious savings goals. A Solo 401(k) plan empowers independent professionals and small business owners to leverage both employee and employer contributions for higher annual savings. When paired with a Roth option, it transforms contributions into after-tax dollars that grow and can be withdrawn tax-free—offering a level of tax diversification few retirement vehicles match.

In this guide, we explain the key features and requirements of a Roth-enabled Solo 401(k), drawing on IRS Publication 560 and industry best practices. You’ll learn how to confirm eligibility, navigate 2024 and 2025 contribution limits and deadlines, and distinguish traditional pre-tax deferrals from Roth elective contributions. We’ll also cover plan setup steps, in-plan conversions, and recent changes under the SECURE 2.0 Act that affect employer contributions.

By exploring strategic considerations—such as balancing current tax savings with future tax certainty, utilizing catch-up and Mega Backdoor Roth strategies, and maintaining compliance with Form 5500-EZ—you’ll gain a clear roadmap for optimizing your Solo 401(k) with Roth. Here’s how to get started.

What Is a Solo 401(k) and Why Add a Roth Option?

A Solo 401(k) is a retirement plan designed specifically for self-employed individuals and owner-only businesses. Unlike a typical employer-sponsored 401(k), it covers only the business owner—and, if eligible, the owner’s spouse. By combining both “employee” and “employer” contributions, Solo 401(k) plans offer higher annual savings limits than most other self-employed retirement vehicles.

Compared with a standard 401(k), a Solo 401(k):

Exempts you from nondiscrimination testing, since no rank-and-file employees participate
Lets you make both salary-deferral and profit-sharing contributions
Allows catch-up contributions after age 50
Can include a Roth option for after-tax savings

Adding a Roth option turns part—or all—of your elective deferrals into after-tax contributions. Those dollars grow tax-free and, provided you meet qualification rules, can be withdrawn tax-free in retirement. This creates tax diversification: you balance accounts that lower taxable income today (traditional) with accounts that lock in tax-free income later (Roth).

For example, if you expect to be in a higher tax bracket in twenty years, Roth contributions let you pay tax at today’s rate and avoid higher taxes on growth and withdrawals. Even if your bracket is similar or lower down the road, having both pre-tax and after-tax buckets gives you more flexibility to manage withdrawals and taxes in retirement.

By combining the Solo 401(k) structure with a Roth option, you maximize savings capacity while hedging against future tax uncertainty. Below we’ll explore who can set one up and how traditional and Roth contributions differ.

Eligibility Requirements for a Solo 401(k)

To establish a Solo 401(k), you must:

Operate as a sole proprietorship, partnership, LLC, S-corp or C-corp
Have no common-law employees other than your spouse
Earn self-employment income or W-2 wages from your own business

If your spouse works in the business and receives compensation, they can participate too—effectively doubling household contribution potential. As soon as you hire outside W-2 employees, the plan no longer qualifies as “solo” and becomes subject to full 401(k) plan rules.

Traditional vs. Roth Contributions: Key Differences

Traditional (pre-tax) contributions

Reduce your taxable income in the year of contribution
Grow tax-deferred until distribution
Are taxed as ordinary income when withdrawn

Roth (after-tax) contributions

Are made with already-taxed dollars (no current deduction)
Grow tax-free
Qualify for tax-free withdrawals if you’re age 59½ or older and have held the account for five tax years

Actionable example: Contributing $10,000 pre-tax today saves you $2,400 in federal tax (assuming a 24% bracket), but you’ll pay tax on growth later. A $10,000 Roth contribution offers no upfront deduction, yet that same $10,000 plus decades of gains can come out tax-free—potentially saving more if your tax rate rises.

Contribution Limits and Deadlines for Solo 401(k) With Roth

Solo 401(k) plans let you combine two contribution streams—employee elective deferrals and employer profit-sharing—to reach substantial annual caps. Understanding each component’s limit and its deadline ensures you maximize Roth savings without missing key dates.

Employee Elective Deferral Limits

As the “employee” in your plan, you can defer part of your compensation on either a traditional or Roth basis (or split between them) up to these limits:

2024: up to $23,000; if you’re age 50 or older, add a $7,500 catch-up contribution for a total of $30,500.
2025: up to $23,500; catch-up is $7,500 for those age 50–59 or 64+, and $11,250 for ages 60–63.

Elective deferrals must not exceed 100% of your eligible compensation. For a sole proprietor, “compensation” is net Schedule C profit minus one-half of self-employment tax; for an S-corp owner, it’s W-2 wages.

Employer Profit-Sharing Contributions

On top of your deferrals, the plan lets the “employer” (your business) contribute up to:

Corporations: 25% of W-2 wages.
Sole proprietors/partnerships: an effective rate of 20% of net self-employment income.

Example: If an S-corp owner pays themselves $100,000 in W-2 wages, the profit-sharing contribution can be as much as:

25% × $100,000 = $25,000

For sole proprietors, the IRS requires adjusting the 25% rate to account for the contribution itself, resulting in the 20% effective rate.

Combined Annual Contribution Caps

All contributions to your Solo 401(k) (elective deferrals + employer profit-sharing + after-tax if any) cannot exceed the total limit for the year:

2024: $69,000, plus the $7,500 catch-up if you’re age 50 or older (total cap $76,500).
2025: $70,000, plus catch-up (total cap $77,500).

Note that catch-up contributions don’t count toward the combined cap—they’re in addition to the $69,000/$70,000 ceiling.

Important Deadlines for Contributions

Timing matters for maximizing contributions:

Employee elective deferrals:
– Incorporated businesses: by December 31 of the plan year.
– Sole proprietors and single-member LLCs: by the tax-filing deadline (usually April 15), including extensions.
Employer profit-sharing contributions:
– By your business’s tax-filing deadline, including extensions (for example, October 15 for calendar-year C-corps after filing Form 7004).

Missing these deadlines means forfeiting the tax-advantaged contribution for that year. Mark your calendar and, if needed, file for extensions to secure every dollar of Roth savings you’re entitled to.

Tax Benefits of the Roth Solo 401(k)

Roth contributions stand out for the simple reason that once they’re in your Solo 401(k), both your contributions and their gains grow completely tax-free. You pay income tax on the money before it goes into the plan, and future earnings accumulate without annual tax drag. That clarity can be a game-changer if you expect higher tax rates down the road or simply want to lock in today’s rates.

Blending Roth and traditional buckets also gives you unmatched flexibility. You can draw from pre-tax assets when it makes sense and tap Roth dollars in years you want to minimize taxable income. This mix helps you manage Medicare premiums, Social Security taxation and unexpected expenses without triggering big tax bills.

Tax-Free Growth and Qualified Distributions

Once you designate Roth elective deferrals in your Solo 401(k), those after-tax dollars and their investment returns never face another income tax—provided you meet the qualified distribution rules. To qualify, you must satisfy both:

A five-tax-year holding period, and
One of: age 59½, disability or death.

These requirements align with IRS Publication 560, ensuring that your entire withdrawal—principal plus earnings—emerges in retirement completely tax-free.

Impact on Current Tax Liability

Roth contributions carry no upfront deduction, so they won’t lower your taxable income today. That trade-off can be worthwhile because:

You fix your tax cost now, sidestepping future rate hikes.
Your annual cash flow planning becomes more predictable—you know your retirement savings won’t spike your tax bill later.
You retain the option to shift withdrawals between pre-tax and Roth accounts in retirement, based on your tax bracket and needs.

Deciding how much to allocate to Roth versus traditional deferrals hinges on your current rate, retirement aspirations and comfort with tax uncertainty.

Avoiding Required Minimum Distributions (RMDs)

By default, Roth 401(k) accounts require RMDs at age 72, just like their pre-tax siblings. Fortunately, you can roll your Roth Solo 401(k) over to a Roth IRA upon separation from your business. Roth IRAs have no RMDs during the owner’s lifetime, so this move preserves your tax-free growth indefinitely. It’s a simple yet powerful strategy to maintain control over your withdrawals—and to keep your heirs from facing accelerated payout schedules and potential tax surprises.

How to Make Roth Contributions in a Solo 401(k)

Implementing Roth contributions in your Solo 401(k) involves updating your plan document, notifying your provider, and understanding the differences between elective deferrals and after-tax contributions. The process ensures that you have a designated Roth account in which your after-tax dollars—and their future earnings—grow tax-free under qualified distribution rules.

Setting Up Roth Designation in Your Plan

Before you can start making Roth contributions, your Solo 401(k) plan must explicitly allow them. Here’s how to get that in place:

Adopt or amend your plan document
- If you’re setting up a new Solo 401(k), choose a model document that includes a designated Roth elective deferral provision.
- If you already have a plan, work with your Third-Party Administrator (TPA) or provider to file an amendment adding the Roth option.
Coordinate administrative details with your provider
- Confirm that your recordkeeper can track both pre-tax and Roth subaccounts.
- Ensure your payroll or bookkeeping system can allocate your elected Roth deferrals correctly.
Communicate your election deadlines
- For incorporated businesses, your Roth election generally must be in place by December 31 of the plan year.
- Sole proprietors and single-member LLCs often have until the tax-filing deadline (including extensions) to make or change their elections.

Updating the legal and administrative framework ahead of the deadline ensures your after-tax deferrals flow into the correct Roth account without manual adjustments at year-end.

Elective Deferral vs. After-Tax Roth Contributions

Not all Roth contributions to a Solo 401(k) are created equal. Understanding the distinction helps you maximize tax efficiency:

• Designated Roth elective deferrals

Count toward your annual deferral limit ($23,000 in 2024; $23,500 in 2025, plus catch-up).
Made directly from payroll or owner compensation as after-tax dollars.
Once in the Roth subaccount, they grow tax-free.

• Non-elective after-tax contributions

Made above and beyond elective deferrals, up to your total plan cap ($69,000 in 2024; $70,000 in 2025, plus catch-up).
Initially held in a traditional after-tax account, then optionally converted to Roth.
Earnings on these contributions are taxable at conversion, but the principal is not.

Many Solo 401(k) providers let you split your elective deferrals between traditional and Roth up to the employee deferral limit. If you still have headroom under the overall contribution cap, you can make additional after-tax contributions and convert them in-plan. This two-step approach—contribute after-tax, then convert—effectively implements a Mega Backdoor Roth without jeopardizing your QBI deduction.

In-Plan Roth Rollovers (Conversions)

Once your plan accepts after-tax contributions, you can convert those balances into your Roth subaccount without ever leaving the plan. Here’s what you need to know:

Initiate an in-plan conversion
- Request the custodian to move your after-tax principal and any accrued earnings into the Roth subaccount.
- Some plans allow partial conversions (only principal) to minimize current taxes on earnings.
Tax treatment of the conversion
- You pay income tax on any earnings converted, but not on the after-tax principal.
- Report the conversion on IRS Form 1099-R and include it on your tax return for the year of conversion.
Follow IRS guidelines
- The IRS outlines in-plan Roth rollover rules in Publication 560.
- Make sure conversions occur after contribution deadlines to avoid misallocation between plan years.

By converting within the plan, you avoid rollovers, extra custodial fees, and potential delays. This streamlined process locks your savings into a Roth vehicle, preserving tax-free growth and simplifying your recordkeeping.

With your plan amended, your Roth election in place, and a clear conversion strategy, you’ll be positioned to harness the full potential of a Solo 401(k) with a Roth option. Next, we’ll explore how the SECURE 2.0 Act broadens employer Roth contributions and what that means for your overall tax strategy.

Impact of the SECURE 2.0 Act on Roth Employer Contributions

The SECURE 2.0 Act introduced a significant change for 401(k) plans, including Solo 401(k)s, by allowing what were once strictly pre-tax “non-elective” contributions from employers to be designated as Roth. Before this law, employer profit-sharing contributions could only be made on a pre-tax basis, even if your plan already offered a Roth elective deferral for employee contributions. Now, for the first time, business owners can direct their employer share into a Roth account, locking in tax-free growth on those dollars, just like they can with Roth elective deferrals.

While the rule technically took effect at the start of 2023, most plan providers needed time to update documents and systems. Late in 2023, the IRS issued Notice 2024-2, which filled in the remaining administrative details. Together, these developments give self-employed individuals more flexibility—but also call for careful planning to avoid unintended tax consequences.

SECURE 2.0 Provision Overview

Section 603 of the SECURE 2.0 Act amended Internal Revenue Code Section 402A to extend the Roth option to employer contributions. In plain terms, that means contributions your business makes on your behalf—up to 25 percent of compensation—can now be designated as Roth rather than automatically pre-tax. For a Solo 401(k), this applies to the “non-elective” profit-sharing contribution, just as it does to matching contributions in larger plans.

The effective date is contributions made after December 31, 2022, although many plan sponsors and administrators only rolled out the feature in late 2023 or early 2024. To take advantage, you’ll need a plan document that expressly permits Roth employer contributions and a recordkeeper capable of tracking them separately from pre-tax employer dollars.

Reporting Roth Employer Contributions

Rather than overhaul the W-2 and payroll-tax reporting framework, the IRS’s workaround in Notice 2024-2 shifts the burden to plan custodians. Under this guidance, employer Roth contributions are first reported as if they were pre-tax non-elective contributions, and then immediately converted into Roth accounts by the trustee.

On paper, it looks like your business deducted the contribution, and then you paid tax on the “conversion” back to Roth. In reality, no net tax deduction occurs, but the reporting approach avoids rewriting payroll systems. The side effect: for businesses claiming the Qualified Business Income (QBI) deduction under Section 199A, that initial “deduction” can shave your QBI calculation—reducing the very deduction you hoped to preserve.

Strategic Considerations for Self-Employed Owners

If you’re eligible for the 20 percent QBI deduction, Roth employer contributions may inadvertently erode that benefit. Since the IRS treats them as deductible pre-tax contributions before conversion, your business’s taxable income dips—just on paper—lowering the QBI base even though your personal taxable income doesn’t change.

A simple workaround: make after-tax employee contributions up to your overall Solo 401(k) cap, then convert them in-plan to Roth. Because after-tax employee contributions aren’t deductible at all, they don’t affect QBI. You still end up with the same Roth balance and tax-free growth, but without the phantom hit to your deduction. Before you act, check with your TPA or tax advisor to confirm your plan allows after-tax contributions and in-plan rollovers—and to model the net impact on your QBI deduction.

Strategic Considerations: Balancing Traditional and Roth

Choosing between traditional pre-tax deferrals and Roth after-tax contributions isn’t an all-or-nothing decision. Rather, it’s a balancing act that takes into account your current tax bracket, projected future rates, retirement timeline, and personal cash flow needs. By blending both options, you build flexibility into your strategy—so you can draw down the most tax-efficient bucket in retirement and avoid surprises when tax laws or your life circumstances change.

Evaluating Current vs. Future Tax Rates

At the heart of the traditional-versus-Roth debate is a simple question: will you pay more tax now, or later? If you expect your marginal tax rate to be higher in retirement than today, Roth contributions can lock in today’s lower rate. Conversely, if you’re in a peak earning year and anticipate a drop in income (and taxes) after you hang up your hat, traditional deferrals can provide relief now and a smaller tax bite later.

For instance, consider Olivia, who is 45 and in the 32% tax bracket. If she defers $15,000 pre-tax, she saves $4,800 in federal tax today. But if she expects to land in the 22% bracket at age 65, a $15,000 Roth contribution might cost her the same $4,800 upfront yet yield tax-free withdrawals that would otherwise face 22% tax on growth. A decision matrix helps:

• Current high rate + expected lower future rate → traditional
• Current moderate rate + expected higher future rate → Roth
• Uncertain future tax policy → split contributions

Tracking both pre-tax and Roth balances lets you adapt to changes in retirement income needs, tax law updates, and personal goals.

Role of Catch-Up Contributions for Older Savers

Once you hit age 50, catch-up contributions let you turbo-charge your retirement savings—up to $7,500 extra in 2024 and beyond. Deciding whether to place catch-ups in a traditional or Roth account depends on your tax outlook and cash flow. If you still need the deduction, a pre-tax catch-up might make sense. But if you’ve reached a point where tax-free growth is more valuable, applying catch-ups to Roth will lock in tax-free earnings on these larger contributions.

Starting in 2026, SECURE 2.0 mandates that any catch-up contributions made by employees earning more than $145,000 (as indexed) must be Roth. That means high earners won’t have a choice—those extra dollars go in after tax. Planning ahead for this change can help you shift more of your overall contributions into Roth sooner, avoiding a year-end scramble.

Mega Backdoor Roth Strategy

If you still have room under your total Solo 401(k) cap after maxing out elective deferrals and profit-sharing, consider the Mega Backdoor Roth. This maneuver uses non-elective after-tax contributions—up to the overall limit ($69,000 in 2024; $70,000 in 2025)—before converting them in-plan to Roth. It’s a powerful way to funnel additional savings into a tax-free vehicle far beyond standard Roth contribution limits.

To execute this strategy smoothly:

Confirm your plan allows after-tax contributions and in-plan Roth conversions.

Calculate your available contribution space:

Available = Total Cap − (Elective Deferrals + Profit-Sharing)

Make after-tax contributions up to your available amount by your deadline.
Initiate an in-plan conversion of the after-tax dollars into your Roth subaccount.

Because conversions trigger tax on any earnings only, you can time them to minimize the tax impact—often by converting early in the year before gains accumulate. Check with your plan provider to ensure they support the necessary recordkeeping and conversion process. With the Mega Backdoor Roth in place, you supercharge your Solo 401(k) for decades of tax-free growth.

By thoughtfully blending traditional deferrals, Roth contributions, catch-up savings, and after-tax strategies, you create a custom-tailored retirement vehicle. This balance shields you from future tax volatility, boosts your long-term returns, and gives you multiple levers to manage income and taxes in retirement.

Comparison With Other Retirement Plans

When you’re self-employed, choosing the right retirement vehicle can feel like navigating a maze of acronyms and fine print. A Solo 401(k) with a Roth option frequently stands out for its blend of high contribution potential, tax flexibility, and robust features. Below, we compare it head-to-head with other popular self-employed retirement plans to show why it often comes out on top.

Solo 401(k) vs. SEP IRA

A SEP IRA is simple: the employer (you) makes all contributions, up to 25% of compensation (effectively 20% for sole proprietors), and there’s no Roth component. It’s easy to set up and requires minimal paperwork, but it has notable drawbacks:

No salary-deferral elections. All savings come from employer contributions, so you miss out on the employee deferral window ($23,000 in 2024, plus catch-up).
No catch-up contributions at age 50.
No Roth option. Every dollar grows tax-deferred and is taxable on withdrawal.

By contrast, a Solo 401(k) lets you:

Defer up to $23,000 (2024) as employee contributions—traditional, Roth, or split between them.
Add catch-up deferrals of $7,500 once you reach age 50.
Layer on profit-sharing contributions up to the overall cap ($69,000 in 2024, $70,000 in 2025).
Secure tax-free growth on Roth elective deferrals and after-tax conversions.

That combination of elective deferrals, catch-up room, and Roth flexibility makes the Solo 401(k) a far more powerful savings tool than a SEP IRA for most business owners.

Solo 401(k) vs. SIMPLE IRA

A SIMPLE IRA targets very small businesses (100 or fewer employees), capping employee contributions at $16,000 in 2024 ($16,500 in 2025) plus a $3,500 catch-up. Employers must either match contributions up to 3% of salary or make a 2% non-elective contribution for every eligible employee. However:

Contribution limits for employees are lower than those in a Solo 401(k).
There’s no Roth feature—every contribution defers tax until distribution.
Employer contributions are mandatory even if business profits are low.

A Solo 401(k) eliminates the matching requirement, offers higher elective deferral limits, and adds a Roth option—letting you tailor contributions to cash flow and tax-planning goals without forced employer contributions.

Solo 401(k) vs. Traditional and Roth IRAs

Traditional and Roth IRAs are straightforward and easy to administer, but they come with lower ceilings and, in the Roth’s case, income limits:

IRA contribution limit of $7,000 in 2024 ($7,500 catch-up for age 50+) is a fraction of Solo 401(k) deferral limits.
Roth IRA contributions phase out at higher incomes (MAGI above $153,000 for single filers in 2024).
No employer profit-sharing component to boost savings above the IRA cap.

A Solo 401(k) sidesteps those constraints entirely: you can defer up to 100% of compensation (within the IRS limits), split contributions between traditional and Roth, and top up with profit-sharing. Even high-earning self-employed professionals who exceed Roth IRA income thresholds can still enjoy tax-free Roth growth via their Solo 401(k).

In each comparison, the Solo 401(k) with a Roth option offers superior contribution flexibility, higher limits, and tax diversification that few other small-business retirement plans can match. For self-employed savers who want to maximize annual deferrals and maintain strategic control over pre-tax and after-tax savings, it remains the premier choice.

Choosing the Right Plan Provider

Selecting the optimal plan provider is as critical as designing the right Solo 401(k) strategy. You’ll want a partner who not only understands the ins and outs of retirement plan rules but also offers the flexibility and support to handle Roth and after-tax features, in-plan conversions, and all the compliance filings a Solo 401(k) entails. Look beyond marketing promises and dig into real-world service levels, platform capabilities, and transparent fee structures.

Every provider will claim to have the best platform, but the differences can significantly affect your experience and your bottom line. Consider your priorities: Do you value low-cost index-fund options, or do you need a self-directed brokerage for alternative investments? Is seamless online access and automated contribution tracking important, or would you rather have a dedicated TPA handle the minutiae? Understanding these nuances up front will save you time, reduce frustration, and keep your plan running smoothly as you grow your business.

Once you’ve narrowed the field, gather detailed proposals and ask pointed questions about how each provider supports Roth subaccounts, after-tax contributions, in-plan conversions, plan loans, and rollover processes. The right plan provider will guide you through setup, handle ongoing compliance like Form 5500-EZ filings, and proactively alert you to legislative changes that could impact your Solo 401(k).

Investment Options and Fee Structures

Not all investment menus are created equal. Some providers offer a curated lineup of low-cost, broad-market mutual funds and exchange-traded funds, while others open the door to self-directed brokerage accounts with stocks, bonds, and even alternative assets. Weigh the fee structures carefully—a flat administrative fee might appeal on the surface, but asset-based fees can make sense if you prefer a hands-off approach and robust ongoing support. Conversely, if you plan to trade actively or hold niche securities, a per-transaction fee model could be more cost-effective.

Roth and After-Tax Options Availability

Before you commit, verify that your chosen provider fully supports designated Roth subaccounts and allows after-tax contributions with in-plan Roth conversions. Some platforms still treat Roth as an afterthought, requiring manual processes to convert funds or lacking clear recordkeeping for your Roth and traditional balances. A provider with streamlined in-plan conversion workflows and integrated reporting ensures your after-tax dollars end up in the right bucket without administrative headaches.

Loan and Rollover Provisions

A Solo 401(k) can double as an emergency resource when your business or personal finances face unexpected strains. Check whether the plan allows loans—typically up to 50% of your vested balance or $50,000, whichever is less—and understand the repayment terms. Equally important is rollover flexibility: you’ll want to easily bring in assets from old 401(k)s or IRA accounts without triggering unintended taxable events. A provider with a clear, efficient process for incoming and outgoing rollovers can turn complex moves into simple, one-call transactions.

Compliance Requirements and Annual Filing

Even though a Solo 401(k) covers only you (and perhaps a spouse), you still carry the responsibility of keeping your plan in good standing with the IRS and the Department of Labor. One key obligation is the annual filing of IRS Form 5500-EZ once your plan’s assets exceed a certain threshold. Staying on top of these requirements helps you avoid costly penalties, preserve the plan’s tax advantages, and maintain peace of mind as you grow your retirement nest egg.

Understanding Form 5500-EZ Filing Obligations

Form 5500-EZ is the simplified annual return that one-participant retirement plans—including Solo 401(k)s—must file when plan assets top $250,000 at the close of the plan year. This requirement applies whether the plan covers just you or you and your spouse. Smaller plans with assets under that limit aren’t required to file, but it’s wise to monitor your account balance and plan for the year you’ll cross the threshold.
For details on completing the return, refer to the IRS instructions for Form 5500-EZ: https://www.irs.gov/forms-pubs/about-form-5500-ez.

Deadlines and Extensions for Form 5500-EZ

The standard deadline for filing Form 5500-EZ is the last day of the seventh month after your plan year ends. For calendar-year plans, that means a July 31 due date. If you’re not ready by then, you can request an extension of up to 2½ months by submitting Form 5558 before the original due date—pushing your deadline into mid-October. Remember that an approved extension gives you more time to file, but it doesn’t extend the deadline for any tax payments tied to plan contributions.

Penalties for Late or Incorrect Filing

Missing the filing deadline or submitting an incomplete Form 5500-EZ can trigger per-day penalties from the IRS and the Department of Labor. These fines aren’t just a slap on the wrist; they can accumulate rapidly and eat into your retirement savings. In addition, failure to meet reporting obligations may expose your plan to audits and could jeopardize its qualified status—potentially undoing the tax benefits you’ve worked so hard to secure.
Staying organized, marking key dates on your calendar, and partnering with a knowledgeable plan provider can help you avoid these pitfalls and keep your Solo 401(k) compliant year after year.

Action Steps to Set Up a Solo 401(k) With Roth Option

Getting your Solo 401(k) with a Roth option up and running involves a clear series of steps—from confirming your eligibility through implementing ongoing maintenance. Use the checklist below to guide you through the process and ensure your plan is both compliant and optimized for tax-free growth.

Assess Eligibility and Business Structure

Before you dive into paperwork, verify that your business meets the basic Solo 401(k) requirements:

Confirm your entity type: sole proprietorship, partnership, LLC, S-corp or C-corp.
Ensure you have no common-law employees other than your spouse.
Determine your compensation basis: net Schedule C income (sole prop), K-1 self-employment income (partnership), or W-2 wages (S-corp).
If your spouse earns compensation, decide whether to include them as a plan participant to double household contribution room.

Select a Plan Provider and Draft Plan Document

Choose a provider and establish a legal framework that supports Roth features:

Compare providers on fees, investment menus, recordkeeping and customer support.
Review sample plan documents to confirm they include designated Roth elective deferrals and after-tax contribution provisions.
Adopt a new plan or amend your existing document—often with the help of a Third-Party Administrator (TPA).
Sign and retain copies of your plan adoption and amendment documents.

Fund Your Plan and Elect Roth Contributions

With your legal setup in place, it’s time to start contributing:

File your Roth deferral election by the relevant deadline (December 31 for corporations; tax-filing deadline for sole props/LLCs).
Direct your payroll or bookkeeping system to withhold the Roth portion of your elective deferrals.
Calculate and fund employer profit-sharing contributions by your business tax-filing deadline (including extensions).
If you have room under the combined cap, make after-tax contributions and initiate an in-plan Roth conversion to maximize tax-free growth.

Monitor and Adjust Your Contributions Annually

A Solo 401(k) is not “set-and-forget.” Keep it dialed in year after year:

Review your annual compensation and adjust deferral percentages to hit maximum limits.
Track total contributions (employee + employer + after-tax) to avoid over-contributing.
File Form 5500-EZ if your plan’s assets exceed $250,000 at year-end; request extensions via Form 5558 if needed.
Revisit your allocation mix—traditional vs. Roth—based on your changing tax bracket and retirement timeline.

Ready to simplify your Solo 401(k) setup, harness a Roth option and lock in expert fiduciary oversight? Partner with Summit Consulting Group’s retirement plan experts to handle document preparation, compliance filings and ongoing administration—so you can focus on growing your business.

Putting Your Roth Solo 401(k) in Action

You now have a comprehensive roadmap for maximizing your retirement savings with a Solo 401(k) that includes a Roth option. By tapping into both traditional and after-tax strategies, you can:

Leverage the highest contribution limits available to the self-employed
Build tax diversification with tax-deferred and tax-free buckets
Lock in tax-free growth and withdrawals on your Roth dollars
Execute catch-up and Mega Backdoor Roth maneuvers for extra savings
Preserve your Qualified Business Income deduction by using after-tax conversions
Streamline compliance—RMD avoidance, Form 5500-EZ filings, and administrative tasks

Getting your plan off the ground takes deliberate steps, but once set up it runs smoothly year after year. At a high level, the process looks like this:

Assess your eligibility—confirm entity type, compensation source and lack of non-spouse employees.
Select a provider—choose a platform or TPA that supports designated Roth accounts, after-tax contributions and in-plan conversions.
Adopt or amend your plan document—insist on Roth elective deferrals, after-tax subaccounts and the ability to roll over in-plan.
File your Roth elections and fund contributions—elect your split of traditional vs. Roth deferrals by the deadline, then make employer profit-sharing contributions and any after-tax deposits.
Convert after-tax balances in-plan—use in-plan Roth rollovers to shift nondeductible contributions into the Roth subaccount, paying tax only on earnings.
Monitor, adjust and comply—track total contributions, tweak your mix as your tax outlook evolves, and file Form 5500-EZ when your assets exceed $250,000.

Your retirement strategy deserves expert guidance and hands-on administration to keep you focused on growing your business. Summit Consulting Group offers tailored Solo 401(k) plan setup, fiduciary oversight and ongoing compliance support—complete with Roth designation, in-plan conversions and QBI-friendly designs. Take the next step toward tax-diversified, high-limit savings by partnering with our team at Summit Consulting Group.