No Income Limits for Roth 401(k)s: What That Means for Your Retirement Strategy

When it comes to saving for retirement, many people run into the frustrating reality of income limits, especially with Roth IRAs. High earners often discover they’re phased out of contributing directly to a Roth IRA.

But here’s some good news: Designated Roth 401(k)s have no income limits. That means no matter how much you earn, if your employer offers one, you can take advantage of the Roth option.

Let’s break down what that means, how it compares to other Roth options, and where Self-Directed IRAs and Solo 401(k)s fit into the picture. ‍

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Why Roth 401(k)s Stand Out‍

Unlike Roth IRAs, which have strict income phaseouts (in 2025, contributions start phasing out at $165,000 for singles and $246,000 for married couples filing jointly), anyone with access to a Roth 401(k) can contribute, regardless of income.

‍2025 Roth 401(k) Employee Roth Designated Contribution Limits:

• Employee Contributions:
  
  • Under age 50: $23,500
  • Age over 50 (Catch-up): $23,500 + $7,500 = $31,000
  • Age 60–63 (Enhanced catch-up): $23,500 + $11,250 = $34,750

These contributions grow tax-free, and qualified withdrawals in retirement are also tax-free. ‍

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How Self-Directed IRAs Fit In

If your employer doesn’t offer a Roth 401(k), or you want to diversify your retirement funds into alternative assets, a Roth Self-Directed IRA (SDIRA) may be an option.

With an SDIRA, you can invest in a wide range of assets beyond stocks and mutual funds, including:

• Real estate (residential, commercial, raw land)
• Private lending (secured promissory notes)
• Cryptocurrency
• Precious metals
• Private equity or startups
• Tax liens and deeds

A self-directed IRA lets you take control of your retirement by letting you invest your IRA or Solo(k) in what you know and understand best. ‍

Roth SDIRA: You can also set up a Roth version of a Self-Directed IRA, which allows after-tax contributions and tax-free withdrawals once the account is qualified (subject to Roth rules). ‍

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Self-Directed Solo 401(k)s for Business Owners

If you’re self-employed or own a small business with no full-time employees (other than your spouse), a Self-Directed Solo 401(k) may give you the best of both worlds:

• No income limits for Roth contributions
• Higher contribution limits than an IRA
• The ability to invest in alternative assets, just like an SDIRA
• Flexible Roth or pre-tax contribution options

For 2025, you can contribute up to $23,500 as an employee plus up to 25% of compensation as an employer, not exceeding the $70,000 combined limit. That can be even higher if you qualify for catch-up contributions. ‍

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What About a Backdoor Roth IRA?

If your income is too high for a direct Roth IRA, you may consider a Backdoor Roth IRA. This strategy involves:

1. Making a non-deductible contribution to a Traditional IRA.
2. Converting it to a Roth IRA (and paying taxes on any pre-tax amounts).

This is often used by high earners to access Roth benefits—though you’ll want a CPA to make sure you avoid the pro-rata tax rule traps. ‍

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Choosing the Right Roth Strategy

Here’s how the different Roth options compare:

• Roth 401(k) – No income limit to contribute; higher contribution limits than an IRA; access to alternative assets depends on your employer’s plan rules.
• Roth Self-Directed IRA – Same income limits as a Roth IRA; contribution limit is $7,000 ($8,000 if 50+); allows investment in a wide range of alternative assets.
• Self-Directed Solo 401(k) – No income limits; contribution limits up to $70,000 combined (more with catch-ups); full access to alternative assets.
• Backdoor Roth IRA – No direct income limit because it’s a conversion strategy; You are using funds already inside another IRA. It can also be self-directed to invest in alternative assets.

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Final Thoughts

Whether you use a Roth 401(k), Roth Self-Directed IRA, Solo 401(k), or a Backdoor Roth strategy, the key is making sure your plan aligns with your retirement goals, risk tolerance, and tax strategy.

A Roth can be a powerful tool for creating tax-free income in retirement, but it’s not the right fit for everyone. Before making changes, check with your CPA or financial planner to ensure you’re choosing the path that works best for your unique situation. ‍

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Ready to explore Self-Directed Roth options?

Mountain West IRA can help you open a Roth Self-Directed IRA or Solo 401(k) and guide you through the process of investing in alternative assets—while staying compliant with IRS rules.

📞 Call us at 866-377-3311

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