If you participate in a company 401(k) plan, you already know the basics: you can contribute pre‑tax dollars to a traditional account or after‑tax dollars to a Roth account. But some plans offer a third option — after‑tax contributions to a traditional account. Understanding how this works can help you maximize your retirement savings.
Traditional vs. Roth Deferrals
For 2026, the elective deferral limit is $24,500. If you’re 50 or older, you can make catch‑up contributions of $8,000 or $11,250 depending on your age. However, if your 2025 salary exceeded $150,000, catch‑up contributions must go into a Roth 401(k).
- Traditional 401(k): Pre‑tax contributions reduce taxable income, grow tax‑deferred, and are taxed upon withdrawal.
- Roth 401(k): After‑tax contributions don’t reduce taxable income, but earnings grow tax‑free and qualified withdrawals are tax‑free after age 59½ and five years of participation.
How After‑Tax Contributions Differ
Non‑Roth after‑tax contributions are included in taxable wages and subject to income tax, FICA tax, and possibly state/local taxes. Unlike Roth contributions, they don’t provide tax‑free withdrawals on growth.
So why consider them? Because they allow you to contribute beyond the elective deferral limit. After‑tax contributions can help you build a larger retirement balance, with growth tax‑deferred until withdrawal.
Contribution Limits
Total annual additions to your 401(k) — including elective deferrals, after‑tax contributions, and employer contributions — cannot exceed the lesser of $72,000 or 100% of your compensation in 2026.
After‑tax contributions create tax basis in your account, meaning the contributed amount can eventually be withdrawn tax‑free. Growth on those contributions, however, is taxable.
Example in Action
Suppose your salary is $150,000 in 2026, you’re under 50, and your employer offers a 50% match. You contribute $24,500 pre‑tax, and your employer adds $12,250. That leaves room for $35,250 in after‑tax contributions. If you add $10,000 after‑tax:
- $24,500 pre‑tax contributions reduce taxable income but are subject to FICA.
- $12,250 employer match is exempt from income and FICA taxes.
- $10,000 after‑tax contributions are included in taxable income and FICA, but create tax basis for future tax‑free withdrawals.
Important Considerations
401(k) plans must comply with nondiscrimination rules to ensure fairness between highly compensated and rank‑and‑file employees. While these rules usually don’t restrict after‑tax contributions, exceptions exist.
Beyond Elective Deferrals
If you’ve already maxed out your elective deferrals, after‑tax contributions can be a smart way to grow your retirement savings. Reviewing your personal situation with a financial advisor can help determine whether this strategy fits your goals.