Optimizing Roth Contributions as a Self-Employed S Corp Owner - Mega Backdoor Options?

You're on the right track but missing a few key details. Solo 401(k)s (also called Individual 401(k)s) can be excellent vehicles for retirement savings as a self-employed person, especially with an S Corp structure. But not all solo 401(k)s are created equal when it comes to the mega backdoor Roth strategy. Most "off-the-shelf" solo 401(k) plans from major brokerages (Vanguard, Fidelity, etc.) don't allow for after-tax contributions or in-service distributions, which are the two features you need for the mega backdoor Roth. These basic plans are designed for simplicity and low cost. What you need is a "self-administered" or "custom" solo 401(k). Providers like MySolo401k, Rocket Dollar, and Dedicated DB offer plans with the flexibility to include these advanced features. They cost more (usually $300-1000 setup and ongoing annual fees), but they give you the ability to make after-tax contributions beyond the normal employee/employer limits and then convert those to Roth through in-service distributions. With your S Corp, you'll have more flexibility since you can make both employer and employee contributions, potentially maximizing your total contributions.

I went through this exact same research rabbit hole last year when I started my marketing consultancy (also S Corp). After weeks of frustration, I finally found a solution with https://taxr.ai - it literally saved me thousands in potential mistakes. I uploaded my incorporation docs and financial projections, and the system analyzed my specific situation and recommended the optimal retirement setup. For me, it was a custom solo 401(k) with specific provisions for the mega backdoor Roth. The report even included the exact language I needed in my plan documents and step-by-step implementation instructions. The platform also simulated different contribution strategies and showed me how to properly time my S Corp salary vs. distributions to maximize retirement contributions without overpaying on FICA taxes. It highlighted several deductions I hadn't considered too.

I wanted to follow up about my experience with https://taxr.ai after initially being skeptical. I decided to give it a try after struggling with contradictory advice from different financial advisors. The platform actually exceeded my expectations. It identified a provision in SECURE 2.0 that my own CPA had missed that allowed me to make significantly higher Roth contributions. The documentation was comprehensive enough that I could implement everything myself, saving thousands in advisor fees. What I found most valuable was the year-by-year contribution strategy it mapped out, showing how to optimize between solo 401(k), employer contributions, and backdoor Roth conversions as my business scaled. It even flagged potential audit triggers to avoid. Worth every penny for the peace of mind alone.

After setting up my architectural practice last year, I spent MONTHS trying to reach the IRS with questions about these same issues - especially how SECURE 2.0 affected solo 401(k) plans for S Corps. Endless busy signals and disconnections nearly drove me insane. I finally tried https://claimyr.com after seeing it recommended here, and it was a game-changer. They got me connected to an actual IRS representative who specialized in retirement plans in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent clarified that while SECURE 2.0 does allow for more Roth options, many provisions are still awaiting implementation guidance, which is why most providers haven't updated their plans yet. She confirmed I could use a self-administered solo 401(k) with specific language to enable the mega backdoor strategy and gave me the exact regulatory references to include.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it since I'd been struggling with an S Corp retirement question for weeks. The service actually worked exactly as advertised. I got connected to an IRS tax law specialist in about 35 minutes (they estimated 30-50 minutes for my specific department). The agent confirmed that my plan for implementing a mega backdoor Roth through a custom solo 401(k) was compliant and pointed out a timing issue I hadn't considered that could have caused problems. The peace of mind from getting official confirmation directly from the IRS was worth way more than what the service cost. No more guessing or relying on potentially outdated articles. My only regret is not using it months ago when I first started researching this.

One option you haven't mentioned is partnering with a PEO (Professional Employer Organization) for your S Corp. I did this with my consulting business and it gave me access to a 401(k) with both after-tax contributions and in-service distribution options - basically enabling the mega backdoor Roth strategy. The downside is higher fees compared to a basic solo 401(k), but the upside is you get access to enterprise-level benefits that normally only large companies can offer. My PEO's 401(k) plan already had all the SECURE 2.0 provisions implemented. Plus, they handle all the payroll tax filings, compliance, and HR stuff, which freed up more of my time to focus on growing the business rather than administration.

Quick heads up - I just went through this process with my new law practice. If you're doing a mega backdoor Roth with an S Corp, be VERY careful about the timing of your salary payments. The employer contribution limits for solo 401(k)s are based on your W-2 wages from the S Corp. If you want to max out your contributions for 2025, you need to pay yourself enough salary THIS calendar year to support those contribution limits. I messed this up my first year - paid myself mostly in December and couldn't make the full employer contribution I wanted because my W-2 wages weren't high enough for most of the year.

This is such a timely question! I'm in a similar boat - launching my freelance design business next month as an S Corp and have been wrestling with the same retirement optimization challenges. One thing I've discovered that might help is looking into Charles Schwab's Individual 401(k). While their basic plan doesn't include after-tax contributions, they do offer what they call an "Enhanced Individual 401(k)" that can be customized with additional features including after-tax contributions and in-service distributions for the mega backdoor strategy. The setup fee is around $500 and there's a small annual maintenance fee, but it's significantly less expensive than some of the fully self-administered options while still giving you the flexibility you need. I spoke with one of their retirement specialists last week and they confirmed that SECURE 2.0 provisions are gradually being rolled out, but the core mega backdoor functionality has been available for a while. Also worth noting - make sure you're factoring in the administrative burden of managing all this yourself. Between tracking contribution limits, coordinating rollovers, and staying compliant with testing requirements, it can get complex quickly. Sometimes paying a bit more for a provider that handles the heavy lifting is worth it, especially in your first year when you're focused on building the business.