Roth IRA Vs Roth Solo 401k: Key Differences, Limits & Rules

Do I qualify? – Roth IRA or Roth Solo 401k

Here’s how Roth IRAs and Roth Solo 401ks compare when it comes to eligibility, contributions, and early access to your money.

Feature	Roth IRA	Roth Solo 401k
Who Can Open	Anyone with earned income	Only self-employed individuals with no full-time employees
Contribution Limits (2025)	$7,000 ($8,000 if age 50+)	$23,500 ($31,000 if age 50+)
Income Restrictions	Yes, MAGI limit applies ($165,000 in 2025)	No income cap to contribute
Minimum Age	None, minors with earned income may qualify	Depends on provider; generally adult-only
Withdrawals	Contributions can be withdrawn anytime. Earnings can only be withdrawn penalty-free by age 59½ and 5 years in the account.	Early withdrawals typically incur penalties. Must be 59 ½ years old to avoid penalties.

The Roth IRA is one of the most accessible retirement accounts available. Anyone with earned income can open one, including minors (with a custodian). Not everyone qualifies for a Roth Solo 401k which is only available to self-employed individuals. A Roth Solo 401k is just one part of a Solo 401k account. You need to be eligible for a Solo 401k first, in order to consider contributing to the Roth portion of the plan.

Who Can Open a Roth Solo 401k?

To qualify, you must meet the two key requirements required for a Solo 401k:

✅ You need self-employment income — whether you’re a freelancer, consultant, or small business owner.
✅ You can’t have full-time employees. Even part-time employees count if they’re at least 21 years old and work 500+ hours per year for three consecutive years. Contractors are generally fine.

If you meet both criteria, you can likely open a Solo 401k and choose the Roth option, assuming your provider offers it. 

📝 Note: Not all Solo 401k providers offer a Roth option. Here’s a look at some of the most popular Solo 401k plan providers and the features they offer.

Who Can Open a Roth IRA?

The Roth IRA, on the other hand, doesn’t have any self-employment requirements. Anyone with earned income can open an account and make contributions—whether  you’re a full-time employee, part-time worker, or self-employed. This is why the Roth IRA is one of the most popular retirement accounts.

How Much You Can Contribute to a Roth IRA and Roth Solo 401k

While a Roth IRA is easier to open, its contribution limit is much lower than a Roth Solo 401k.

✅ 2025 Contribution Limits:

If you want to maximize your retirement savings and you’re eligible, the Solo 401k may be better choice. Many people don’t rely on a Roth IRA alone. Some pair it with a corporate 401k, SEP IRA, or other investment accounts.

Employer Contributions & Mega Backdoor Roth

With a Solo 401k, the Roth option is only one part of your account. You also can contribute as an employer which can significantly increase your potential contribution limit: 

✅ 2025: $70,000 ($77,500 if 50+)

Using a Mega Backdoor Roth strategy, you could potentially convert up to $70,000 into a Roth Solo 401k in 2025. 📝 Important Note: You can roll over funds from almost any retirement account into a Solo 401k, except a Roth IRA.

Do You Need to Worry About Income Limits?

In addition to a lower contribution limit, the Roth IRA also comes with income limits. If your income is too high, your contribution limit can be reduced even further or eliminated altogether. 

If you’re considering a Roth IRA, your ability to contribute depends on your Modified Adjusted Gross Income (MAGI).

✅ Roth IRA Income Limits for 2025

To make full contribution to a Roth IRA in 2025, your income must be under $150,000.

In other words, if you make a lot of money, the Roth IRA might not be the best fit for you. However, you can still do a Backdoor Roth IRA conversion by first contributing to a Traditional IRA (which has no income limits for contributions) and then converting those funds into a Roth IRA. Alternatively, a Roth Solo 401k has no income restrictions, making it another viable option.

📌 Also read: Roth IRA vs Traditional IRA

📝 Disclosure: IRS rules and limits can change annually, please be sure to review the latest guidance before making your contributions. 

Age Requirements You Should Know Before You Start

One area where the Roth IRA is better? There’s no minimum age to open an account.

A minor with earned income (like from a paper route or side gig) can start a Roth IRA at any age. That’s a huge advantage because the earlier you start investing, the more time your money has to compound tax-free.

📝 Note: A Roth IRA set up by minors is treated as a custodial account. That means the minors’ guardian manages the account until the child turns 18 years old.

What About the Roth Solo 401k?

It depends on your plan provider. Most Solo 401k plans don’t offer custodial options, making it much harder for minors to open an account.

If you’re young and just starting out, a Roth IRA is the better option.

What Kinds of Investments Can You Choose?

Your investment options depend on the type of account you choose:

✅ Roth IRA (standard) → Traditional assets like stocks, bonds, mutual funds, ETFs.
✅ Roth Solo 401k → All of the above, plus alternative assets like real estate, startups or private companies, and private funds.

If you want to invest in alternative assets through a Roth IRA, you’ll need to open a self-directed IRA or a self-directed IRA with checkbook control.  

✅ Self-directed IRA → gives you access to alternative investments, but you’ll still have to make all purchases through a custodian.  

✅ Self-directed IRA with checkbook control → removes the need to request purchases from your custodian and allows you to make investments directly.

How Withdrawals Work and What to Watch Out For

Both the Roth IRA and Roth Solo 401k let you withdraw tax-free in retirement, but the rules differ. 

Rule	Roth IRA	Roth Solo 401k
Age for penalty-free withdrawals	59 ½	59 ½
5-year rule for withdrawing earnings	✅ Yes	✅Yes
Withdraw contributions anytime?	✅ Yes	❌ No
Early withdrawal penalty?	10% (earnings only)	10% (on full amount)

The biggest advantage of a Roth IRA is that you can withdraw your contributions anytime without penalties. That makes it a more flexible option if you need access to funds before retirement.

The Roth Solo 401k doesn’t allow early withdrawals. Taking money out early means paying income tax plus a 10% penalty on the entire amount.

Wrapping Up

Due to the much higher contribution limit, a Roth Solo 401k is the superior investment vehicle if your goal is to save as much as you can for retirement. However, not everyone qualifies since you need self-employment income with no employees.

The Roth IRA, on the other hand, is much easier to open and has no age requirement, making it a great option for minors and those without self-employment income.

📝 Pro tip: If you’re eligible for both, using both accounts together may allow you to maximize your tax-free retirement savings! 

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