Retirement Solutions

Generally, the best retirement plan for a profitable trader is a Solo 401(k) sponsored by a TTS S-Corp. The S-Corp pays officer compensation through payroll, creating the earned income needed for employee elective deferrals and employer retirement-plan contributions.

A Solo 401(k) can combine an employee elective deferral with an employer profit-sharing contribution. This often allows a larger retirement contribution with less officer compensation than a SEP IRA.

Solo 401(k) Contribution Limits

*Assumes sufficient officer compensation and is subject to the 25%-of-compensation limit.

Traditional employee elective deferrals reduce taxable wages, whereas Roth elective deferrals do not. Employer profit-sharing contributions are generally limited to 25% of officer compensation. For example, the maximum $47,500 employer contribution for 2026 ordinarily requires $190,000 of officer compensation.

Why Traders Use A TTS S-Corp

Trading gains are generally not self-employment income. Therefore, a TTS sole proprietor ordinarily cannot use trading gains alone as earned income for a retirement plan. Partnerships also cannot pay W-2 wages to partners.

A TTS S-Corp can pay officer compensation to the trader-owner, creating earned income for retirement-plan purposes. The S-Corp may also provide other employee benefits, including health insurance.

Mandatory Roth Catch-Up Contributions Beginning In 2026

Beginning in 2026, a catch-up contribution generally must be Roth when the participant’s prior-year FICA wages from the employer sponsoring the plan exceed the applicable threshold.

For 2026 contributions, the test is whether the participant received more than $150,000 of 2025 FICA wages from the S-Corp sponsoring the plan. The threshold is indexed for inflation.

The mandatory Roth rule applies only to the catch-up contribution. An affected trader may still make the regular $24,500 employee elective deferral and the employer profit-sharing contribution as traditional contributions. Only the additional $8,000 catch-up—or $11,250 for someone attaining age 60 through 63—must be Roth.

A trader who does not want any Roth contribution may skip the catch-up contribution. If the plan does not support Roth catch-up contributions, an affected trader generally cannot make a catch-up contribution under that plan.

Roth Employer Profit-Sharing Contributions

SECURE 2.0 also permits employer profit-sharing contributions to be designated as Roth if the Solo 401(k) plan supports the feature.

With a traditional employer contribution, the trader-owner generally receives current tax deferral. With a Roth employer contribution, the trader-owner includes the contribution in current taxable income in exchange for the potential benefit of qualified tax-free Roth distributions later. The S-Corp may still qualify for its otherwise allowable employer-contribution deduction.

The participant’s Roth designation must be made no later than when the contribution is allocated, and the designation is irrevocable. The contribution must be fully vested, and the plan must maintain separate Roth accounting.

A Roth employer contribution is reported on Form 1099-R for the year allocated. For 2026 reporting, the amount is entered in Boxes 1 and 2a, with Code G in Box 7a. It is not treated as wages for federal income tax withholding, Social Security, Medicare, or federal unemployment-tax purposes. The trader may need additional withholding or estimated-tax payments.

Check The Plan Before Proceeding

Provider support varies, particularly among low-cost brokerage Solo 401(k) plans. Before making a Roth employer or catch-up contribution, confirm that the plan document and provider support the contribution, separate Roth accounting, and Form 1099-R reporting.

For more information, see SECURE 2.0 Expands Roth Solo 401(k) Options For TTS S-Corp Traders and the retirement plans chapter of Green’s Trader Tax Guide.