Quick Overview: Roth IRA vs Roth Solo 401k
✅ What They Have in Common
- Funded with after-tax dollars
- Earnings may grow tax-free
- Qualified withdrawals in retirement are not taxed
✅ Key Differences
- Who Can Open One – Anyone can open a Roth IRA, but a Roth Solo 401k is only available for self-employed individuals with no employees.
- Contribution Limits – In 2025, you can contribute up to $23,500 to a Roth Solo 401k ($31,000 if 50 or older) and up to $7,000 to a Roth IRA ($8,000 if 50 or older) so long as you’re below the income cap.
- Income Restrictions – A Roth IRA has an income cap ($165,000 in 2025). A Roth Solo 401k has no income limits
- Age Requirements – A Roth IRA has no minimum age. Minors can open an account if they have earned income. A Roth Solo 401k is only available through certain providers.
- Withdrawal Rules – A withdrawal from a Roth Solo 401k requires you to be at least age 59 ½ to avoid penalties. A Roth IRA lets you withdraw contributions anytime, but earnings can only be withdrawn penalty-free if you’re age 59 1⁄2 and have had the account for at least 5 years.
Looking to open a Solo 401k plan? Get started today with just a few clicks – the Carry Solo 401k Plan is a feature-packed, self-directed account that if qualified, may allow you to invest in both traditional and alternative assets, take out a loan, or do a Mega Backdoor Roth conversion.
Both the Roth Solo 401k and the Roth IRA let you save for retirement using post-tax dollars. You contribute with income that’s already been taxed, but you don’t pay any taxes when you withdraw from either of the two accounts in retirement. In other words, your money can potentially compound tax free, and when you retire and it’s time to take the money out, it’s all yours. While both are powerful retirement accounts, they work very differently. The Roth IRA is generally more accessible, while the Roth Solo 401k can allow for much higher contributions if you qualify. Understanding these differences can help you choose the right one for your financial goals. Let’s break it all down in this article.
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.
- Roth Solo 401k: $23,500 ($31,000 if 50+) + employer contribution
- Roth IRA: $7,000 ($8,000 if 50+)
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
- MAGI under $150,000 → Full contribution allowed
- MAGI between $150,000–$165,000 → Reduced contribution
- MAGI over $165,000 → No contribution allowed
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!
Disclaimer:
The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.
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Eligibility, deductibility, and contribution limits for Traditional and Roth IRAs depend on IRS rules, income, and retirement plan participation. Traditional IRA withdrawals are generally taxed as ordinary income, while qualified Roth IRA distributions are tax-free. Early withdrawals may incur penalties. Traditional IRAs have Required Minimum Distributions; Roth IRAs do not. Advanced strategies like backdoor Roth and mega backdoor Roth conversions may be available but have specific rules and potential tax implications. Contribution limits, rules, and available strategies are subject to change. Individuals are responsible for the ongoing compliance of their plans with current IRS regulations. Consult a tax professional for personalized advice on basic and advanced IRA strategies. Carry does not provide tax or legal counsel.
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