Solo 401k plans are superior to SEP IRAs for most owner-only businesses seeking to maximize retirement savings, as they allow for maximum contributions at a much lower income threshold.
The mega backdoor Roth is an exceptionally powerful tool, but its viability is highly dependent on plan design and company demographics, making it ideal for solo entrepreneurs and large tech firms but unsuitable for many other businesses.
Individuals with multiple income streams (e.g., a W-2 job and a side business) can utilize separate retirement plans for each, with each plan having its own high contribution limit of up to $72,000.
Administrative details are critical and carry significant financial risk; specifically, failing to file Form 5500-EZ for a large Solo 401k can result in crippling penalties of up to $150,000.
A common and dangerous misconception is that Solo 401ks have the same enhanced ERISA creditor protections as corporate 401ks; they do not, leaving assets more vulnerable.
Discourse on 'The Mega Backdoor Roth'
In the 'Masters in Business' episode, LaRosa's discourse focuses on the mechanics and ideal candidates for the mega backdoor Roth strategy. He positions it as a tool for two distinct groups: owner-only businesses and employees at large tech companies with favorable plan design.
Discourse on 'How to Max Out Your Small Business Retirement Plan'
In the 'At the Money' episode, LaRosa broadens his focus to foundational retirement plan choices for entrepreneurs. He presents a comparative analysis of the SEP IRA and Solo 401k, arguing for the latter's superiority in most cases while also detailing its significant administrative burdens.
Impact of Secure 2.0 Act
LaRosa incorporates recent legislative changes into his analysis, noting that the Secure 2.0 Act enhanced the appeal of Roth 401k accounts by eliminating the Required Minimum Distribution (RMD) requirement for them.
Observation of Market Trends
LaRosa observes a shift in the 401k provider landscape, noting that while Fidelity was an early leader in administering the mega backdoor Roth, other providers are now improving their capabilities and 'catching up'.
▶Mega Backdoor Roth StrategyApr 2026
LaRosa provides a detailed breakdown of the mega backdoor Roth strategy, explaining its mechanics, contribution limits (up to $72,000), and ideal use cases. He specifies that it is most effective in Solo 401ks and at large tech companies with many high-income employees, while noting its failure points related to compliance testing in other environments.
Investors should understand that the availability and viability of this powerful strategy are dictated entirely by employer plan design and employee demographics, not just individual desire to participate.
▶Solo 401k vs. SEP IRA for Small BusinessesApr 2026
A core theme is the comparison between the two primary retirement vehicles for the self-employed. LaRosa argues the Solo 401k is often a better option than the more common SEP IRA because it allows for maximum contributions at a lower income level and offers features like Roth contributions and loans, though he concedes the SEP is simpler to administer.
Small business owners may be defaulting to a suboptimal retirement plan (SEP IRA) due to its simplicity, potentially leaving significant tax-advantaged savings unrealized compared to a Solo 401k.
▶Retirement Plan Administration and ComplianceApr 2026
LaRosa emphasizes that administrative details are critical and carry significant financial risk. He details the Form 5500-EZ filing requirement for Solo 401ks over $250,000, which carries a penalty of $250 per day for failure to file, and explains how compliance testing can derail advanced strategies in larger plans.
The operational complexity and potential for severe financial penalties associated with certain retirement plans are a major, and often overlooked, risk factor for business owners.
▶Maximizing Contributions Across Multiple Income StreamsApr 2026
LaRosa clarifies a sophisticated savings strategy for individuals with both a primary job and a side business. He states that each business can have its own retirement plan, and each plan has a separate overall contribution limit (up to $72,000), allowing for massive savings potential far exceeding what is possible with a single plan.
High-earning individuals with side-hustle income have a significant, and likely underutilized, opportunity to dramatically accelerate their retirement savings by establishing a second, independent retirement plan.