Yes, self-employed individuals can have a Roth 401(k) retirement account and contribute to it. A Roth 401(k) is a retirement savings account that allows individuals to contribute after-tax dollars, which can then grow tax-free and be withdrawn tax-free in retirement. While traditional 401(k) plans are typically offered by employers, self-employed individuals can establish their own Roth 401(k) plans through a solo 401(k) or an individual 401(k) plan.
To be eligible for a Roth 401(k) as a self-employed individual, you must meet certain requirements. First, you must have self-employment income from a business that you own or operate. This can include sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Second, you must establish a solo 401(k) or an individual 401(k) plan, which allows you to contribute to both the employee and employer portions of the plan.
The contribution limits for a Roth 401(k) for self-employed individuals are the same as those for traditional 401(k) plans. As of 2024, the maximum contribution limit is $19,500 for individuals under the age of 50. If you are 50 or older, you can make an additional catch-up contribution of $6,500, bringing the total maximum contribution to $26,000.
It's important to note that contributions to a Roth 401(k) are made with after-tax dollars, meaning you don't get a tax deduction for your contributions. However, the earnings in the account can grow tax-free, and qualified withdrawals in retirement are also tax-free.
In summary, self-employed individuals can have a Roth 401(k) and contribute to it through a solo 401(k) or an individual 401(k) plan. The contribution limits are the same as those for traditional 401(k) plans, and contributions are made with after-tax dollars. The account can grow tax-free, and qualified withdrawals in retirement are tax-free.