Roth Solo 401k Sub Account – Helpful Guide for New Plan Owners

Roth Solo 401k Sub Account

Roth Solo 401k Sub Account

The Roth Solo 401k sub account is a hybrid variant of the Individual k retirement plan. Roth 401k is basically a designated contribution which is limited to the elective deferral contribution. The plan participant elects this type of contribution. There are numerous features that this type of sub account offers and are deemed highly beneficial to the plan owner.

Important Facts about the Roth Solo 401k Sub Account

  • According to the Solo 401k rules, elective deferral employer contributions are excluded from the plan participant’s gross income. It is also the plan holder that designates the contribution.
  • The allowed contributions for the Roth sub account are after-tax salary contributions. This means that any employer and pre-tax contributions could not be deposited to the retirement plan with the Roth variant.
  • The sub account is just a variant of the Qualified Plan 401k. It could not exist alone since it is just an option for the traditional self-directed plan.
  • The Roth 401k variant offers tax-free privileges. However, distributions could be taxable in certain situations. For instance, all sub accounts with the Roth features are exclusive from gross income if they are acquired after the participant turned 59 years old. If the plan distribution happens within five years after the contribution was designated, it is already considered taxable.
  • Based on the 2010 legislations for the Small Business Jobs Act, traditional 401 k as well as 403 b retirement plans could be converted to Roth Solo 401k sub account. The convertible account is inclusive of its contribution benefits and limits such as tax-free withdrawal of the contributed amount at least five years after the plan conversion.

Investment Choices with Roth Self Employment Plan 401k

The advantages of the Roth 401k account combine those of the traditional Roth IRA and the Individual k plan. It allows plan holders to use their retirement money for traditional and non-traditional assets. You can diversify your retirement money and see it grow without any tax restrictions. Here are some of the fields where you can use your Roth sub account to fund viable investments:

  • Real estate
  • Precious metals
  • Stocks and bonds
  • Mortgage notes
  • Tax deeds
  • Tax liens

The Roth Solo 401k sub account is an option in the 401 k retirement but it has real potentials to help you earn through your retirement money without tax obligations.

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