Fidelity Investments announced Wednesday the launch of a Roth deferral option within self-employed 401(k) plans created by small-business owners.
The firm has offered its traditional self-employed 401(k) since 2003. Now, self-employed individuals or small-business owners with no employees other than a spouse can choose to make after-tax, salary-deferred contributions to a Roth account set up within their existing self-employed 401(k) plan.
The development aims to help highly compensated business owners respond to a key provision of the Secure 2.0 Act. Among many other changes, the law requires individuals with W-2 income earning more than $145,000 for tax year 2025 to make all catch-up contributions to a Roth account starting in 2026.
Roger Morrisette, vice president of small business retirement products at Fidelity, said in a statement that interest in Roth savings vehicles is increasing among many retirement savers, mostly due to their tax efficiency over the long term.
“Self-employed individuals face unique challenges when planning for retirement since they are not able to leverage more traditional workplace savings options,” Morrisette observed. “Not only do they juggle the day-to-day operations of a business, they are also navigating the most effective way to secure their financial future.”
A Roth option within the 401(k) can offer greater clarity around how much savings will be available in retirement, Morrisette added, since that portion has already been taxed.
As detailed in a recent Fidelity analysis, the Roth solo 401(k) is just a feature of the solo 401(k) plan. This means the annual contribution limits are the same. However, savers now get to choose if they want their contributions to be pre-tax or after-tax, or some of each.
In 2025, the combined limit for employee and employer contributions is $70,000. For employees younger than 50, the Roth solo 401(k) employee deferral limit is $23,500 (the same limit for traditional and Roth 401(k) plans) or 100% of compensation, whichever is lower.
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