What's the best way to maximize Roth contributions as a self-employed S Corp owner?

The confusion is understandable! As someone who helps self-employed professionals with retirement planning, here's what you need to know: You're right that most "off-the-shelf" solo 401(k) plans from major brokerages (Vanguard, Fidelity, etc.) don't support after-tax contributions or in-service distributions needed for the mega backdoor Roth strategy. This isn't because of SECURE 2.0 - it's been this way for years. For your S Corp situation, you have several options: 1. Custom Solo 401(k): There are specialized providers who offer solo 401(k) plans with the features you need. Companies like MySolo401k and Rocket Dollar specifically design plans supporting after-tax contributions and in-service distributions. They cost more than basic plans ($300-1000 setup + annual fees) but provide the functionality you want. 2. SEP IRA + Roth conversions: Another approach is maxing out a SEP IRA (up to 25% of compensation) and then strategically converting portions to your Roth IRA over time. 3. Cash Balance Plan: If you're extremely profitable and want to contribute even more, adding a cash balance plan alongside your 401(k) could allow significantly higher contributions. What many S Corp owners in your position do is pay themselves a reasonable salary that optimizes FICA taxes while allowing maximum retirement contributions.

I went through this exact same situation when I started my consulting business last year! Let me save you some headaches - check out https://taxr.ai for help with all the retirement contribution calculations and tax planning. I was completely overwhelmed trying to figure out how much I could contribute as both employer and employee with my S-Corp structure. Their AI tool analyzed my business structure, income projections, and tax situation, then mapped out exactly how to optimize my retirement contributions. They showed me the exact calculations for my "employer" contributions as an S-Corp owner and how to properly document everything to avoid IRS issues. Seriously, it saved me so much time and probably thousands in potential tax mistakes.

Just wanted to follow up - I tried taxr.ai after my skeptical comment, and I'm genuinely impressed. I've been a sole proprietor for 3 years and was contemplating the S-Corp switch to save on self-employment taxes but was worried about how it would impact my retirement options. The tool analyzed my situation and showed me that with my income level, an S-Corp would save me about $9,400 in SE taxes while still allowing me to contribute $62,000 to retirement accounts through a properly structured solo 401(k). It even factored in the SECURE 2.0 Act changes for catch-up contributions since I'm over 50. What really sold me was their breakdown of exactly how much I needed to pay myself as reasonable compensation vs. distributions to optimize both tax savings and retirement contributions. They even provided documentation templates for establishing the retirement plan that my accountant said were perfectly compliant.

If you're struggling with getting through to the IRS about retirement plan questions or S-Corp filing requirements, I highly recommend https://claimyr.com - it was a game-changer for me when I had questions about my S-Corp's solo 401(k) compliance requirements. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I spent WEEKS trying to get someone at the IRS to clarify some questions about my retirement plan contribution limits as an S-Corp owner. Their phone lines were constantly busy or I'd get disconnected after waiting for an hour. Claimyr got me connected to an actual IRS agent in about 20 minutes who was able to verify exactly what forms I needed to file for my situation.

I need to publicly eat my words here. After calling the Claimyr service a potential scam (sorry about that), I decided to try it myself because I was desperate to get clarification on my retirement plan questions before filing deadlines. It worked exactly as described. I got an alert about 40 minutes after signing up, called the IRS right away using their guidance, and was speaking with an agent within 5 minutes. No hours of hold music, no getting disconnected, just a straight connection to someone who could actually help. The agent clarified that as an S-Corp owner, I needed to file both Form 5500-EZ for my solo 401(k) since my plan assets exceeded $250,000 AND make sure my contributions as "employer" were properly documented in my corporate minutes. This was information I couldn't find clearly stated anywhere online and potentially saved me from an audit headache. For anyone struggling with complex retirement questions that need official IRS clarification, this service is legitimately worth it.

One option nobody's mentioned yet - if you want maximum flexibility with mega backdoor Roth options, consider looking into Ubiquity or Guideline for your 401(k) administration. They're more small-business oriented rather than strictly solo 401(k) providers, but both have started offering after-tax contribution options specifically designed for the mega backdoor Roth strategy. I'm also an S-Corp owner (web development business) and initially went with Vanguard's free solo 401(k), but switched to Guideline last year specifically to access the after-tax contribution feature. The fees are about $40/month plus a small percentage of assets, but the ability to contribute an extra $40k+ annually to my Roth made it well worth it. Just make sure your plan documents explicitly allow for both after-tax contributions AND in-service distributions of those after-tax amounts. Both features are required for the mega backdoor strategy to work properly.

Don't overlook the cashflow implications of going all-in on retirement contributions your first year. I made this mistake with my S-Corp. I maxed out my solo 401(k) contributions in year one ($22,500 employee deferral + 25% of my salary as employer contribution), then realized I hadn't left enough operating capital for quarterly estimated taxes and business investments. I had to take a personal loan to cover obligations, which was stressful and cost me interest. Consider building a 3-6 month operating expense cushion before maxing out retirement contributions, especially if you're projecting strong growth that will require capital reinvestment.

Great thread! As someone who recently went through a similar transition from employee to S-Corp owner, I wanted to add a few practical considerations that took me by surprise: 1. **Payroll complexity**: Once you set up your S-Corp, you'll need to run actual payroll for yourself (including withholdings, quarterly 941s, etc.). This isn't just about calculating the "reasonable salary" - you need systems in place. I use Gusto, which costs about $40/month but handles all the compliance automatically. 2. **Timing of contributions**: Unlike when you were an employee with automatic 401(k) deductions, you'll need to manually coordinate your employee deferrals with your payroll. The IRS requires employee contributions to come from actual paychecks, not just business transfers. 3. **State considerations**: Depending on your state, S-Corp elections might have different implications for state taxes and retirement contributions. Some states don't recognize federal S-Corp elections, which could complicate your planning. The mega backdoor Roth strategy is definitely worth pursuing if your income supports it, but make sure you have the operational infrastructure in place first. I'd recommend starting with a basic solo 401(k) setup in year one to get comfortable with the mechanics, then upgrading to the specialized providers mentioned above once your business is more established. Also consider working with a tax professional who specializes in S-Corps - the peace of mind is worth the cost when you're dealing with both business formation and complex retirement planning simultaneously.