These three plans can get confusing, here’s a breakdown of the differences:

A Solo 401(k) is a retirement plan for self-employed individuals and small business owners with no full-time employees (other than a spouse). It allows for high annual contributions through a combination of pre-tax employee deferrals and employer profit-sharing contributions, offering tax-deferred growth and tax deductions today.

• 2025 limit: Up to $70,000 (or $77,500 if 50+)
• Contributions reduce taxable income now
• Withdrawals are taxable

A Roth Solo 401(k) is a type of Solo 401(k) that lets you make Roth contributions. These contributions grow tax-free, and qualified withdrawals in retirement are also tax-free.

• No upfront tax break
• Tax-free qualified withdrawals
• Ideal for those expecting higher taxes in retirement

A Mega Backdoor Roth Solo 401(k) is a more advanced setup that allows after-tax, non-Roth contributions beyond the standard Roth limit—then converts them to Roth. This strategy enables you to potentially contribute the entire 401(k) limit to Roth each year, if your plan allows it.

• Uses after-tax contributions + in-plan Roth conversions
• Requires a custom plan design (not supported by most brokerages)
• Enables dramatically higher Roth contributions than any other method
• Often paired with checkbook control and broader investment flexibility

To be eligible for a Mega Backdoor Roth Solo 401(k), you must be:

• Self-employed or the owner of a small business with no full-time employees other than yourself and possibly your spouse
• Earning self-employment income from freelance work, consulting, sole proprietorship, LLC, S-corp, or similar

This setup is ideal for high-income earners who want to maximize Roth contributions well beyond traditional IRS limits.

For 2025, a Solo 401(k)—including the Roth option—has a total annual contribution limit of $73,500 (or $77,500 if you’re age 50 or older). This total includes:

• Employee deferrals: Up to $23,000 (or **$30,500 if 50+), which can be designated as either Roth (after-tax) or traditional (pre-tax)
• Employer profit-sharing contributions: Up to 25% of net self-employment income (always pre-tax)
• After-tax contributions (only in custom plans): These are non-Roth, after-tax contributions that can be converted to Roth through the Mega Backdoor Roth strategy

Important: Standard Roth Solo 401(k) plans only allow Roth contributions on the employee deferral portion. To contribute more than $23,000/$30,500 to Roth, your plan must support after-tax contributions and in-plan Roth conversions.

With a Mega Backdoor Solo Roth 401(k) you can invest it:

• Real Estate – Buy rental properties, raw land, or commercial real estate.
• Cryptocurrency – Invest in Bitcoin, Ethereum, and other digital assets
• Private Equity – Fund startups, private businesses, or venture capital
• Tax Liens & Deeds – Purchase tax lien certificates for potential returns.
• Precious Metals – Buy IRS-approved gold, silver, and platinum.

Prohibited investments include collectibles and transactions involving disqualified persons (e.g., yourself or immediate family).

Yes—Mega Backdoor Roth Solo 401(k) plans allow participant loans as long as your plan document includes a loan provision.

• You can borrow up to $50,000 or 50% of your account balance, whichever is less
• The loan is tax- and penalty-free, provided it is repaid within 5 years with interest (usually prime rate + 1%)

No credit check is required, and the process is entirely self-directed if you have checkbook control

Beginning in 2024, thanks to the SECURE Act 2.0, the RMD rules have changed. Roth Solo 401(k) accounts are no longer required to take RMDs during the account owner’s lifetime. This rule mirrors how Roth IRAs work.