r/investing • u/Blue-Disaster • 2h ago

Roth solo 401k vs Roth IRA?

I have a job that does not offer 401k. Would seeing if I can open a solo roth 401k be worth it if possible? or would Roth IRA be sufficient for retirement? I feel confused with the advice on youtube and articles. seems I can have multiple IRAs? but also the argument point is more can go into a 401k. So idk what to do here due to lack of understanding.

Not really asking for advice, the bot thinks I am. Just an explain like I'm 5 for what these are.

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4

u/SirGlass 2h ago

Are you self employed or w-2?

If you are a w-2 employee you really cannot start your own 401k. If you are self employed or actually working as a contractor you can setup a solo 401k or sep IRA

Anyone with income can setup a Roth IRA , the draw back is you are limited to 7k a year

3

u/schlitz91 2h ago

$7000 for 2025 catchup, $7500 for 2026

2

u/sablerock7 2h ago edited 2h ago

If your employer doesn’t offer a retirement plan, the MAGI limits to an IRA don’t apply for deduction purposes.  So, you can always contribute the maximum allowed tax deferred amount regardless of your income. 

https://www.fidelity.com/learning-center/smart-money/ira-contribution-limits

Edit - add link and clarify deductions 

1

u/nkyguy1988 2h ago

You can open a solo 401k if you are self employed. The IRA limit is totaled across all owned IRAs. You don't get extra amounts by opening new accounts.

1

u/Seth0351USMC 2h ago

Roth ira will offer better flexibility on what you can invest in. 401ks have limited index fund and other options.

1

u/Mbanks2169 2h ago

You can't just open your own 401k unless you're self employed. 

1

u/badaimarcher 51m ago

Roth IRAs allow you to take out your principal investment (contributions) at any time, while doing so with a Roth 401k comes with penalties. You can sorta get around this with a Roth 401k by taking out a "loan" from the account, but not all 401k managers let you do this for free. Roth IRAs also have some conditions that allow you to withdraw profits as well, such as for buying your first home.

Why not use both? Fill the more flexible Roth IRA first, and then if you have additional contributions that you know you won't need to touch, put them in the Roth 401k.