Should you make after-tax, non-Roth 401(k) contributions?

Quick answer: You should consider making after-tax, non-Roth 401(k) contributions if you have already maximized your annual pre-tax or Roth elective deferral limits. While these contributions do not offer upfront tax deductions, they allow your investments to grow tax-deferred, maximizing your total retirement savings beyond standard limits.

At SD Mayer, we know that building a solid retirement strategy is about making smart decisions and staying ahead of the curve. If you participate in a company 401(k) plan, you probably know the basics. You can make pre-tax contributions up to the annual limit, or perhaps utilize a Roth 401(k) option. But your plan might offer a powerful third option: making after-tax contributions to a non-Roth account.

This lesser-known approach can be an excellent strategy for high earners looking to accelerate their retirement savings. By understanding how these specific contributions work, you can optimize your finances and take another calculated step toward financial freedom.

How do traditional and Roth 401(k) deferrals work?

Before diving into after-tax contributions, you need to understand standard traditional and Roth deferrals. For 2026, the IRS limits basic 401(k) elective deferral contributions to $24,500.

If you turn 50 or older by year-end, you can make additional "catch-up" contributions. The 2026 catch-up contribution limit is either $8,000 or $11,250, depending on your exact age. However, if your 2025 salary exceeded $150,000, you must direct any catch-up contributions into a Roth 401(k) account.

When you choose a traditional 401(k), your contributions reduce your taxable income for the current year. They remain subject to Social Security and Medicare taxes (FICA tax). The funds grow tax-deferred, meaning you owe income taxes on both the original contributions and the growth when you take distributions.

Conversely, Roth 401(k) contributions do not reduce your current taxable income. You pay both income and FICA taxes upfront. The major benefit is that your account earnings grow income-tax-free. You can also take tax-free qualified withdrawals later in life, provided you meet certain rules, such as being over age 59½ and having the account open for at least five years.

What makes non-Roth, after-tax 401(k) contributions different?

If your company plan allows non-Roth after-tax contributions, the IRS treats this money as part of your taxable wages. You will pay income tax, FICA tax, and potentially state and local taxes on these amounts. Because these funds do not enter a designated Roth account, they do not receive the same tax-free growth benefits.

Choose non-Roth, after-tax contributions if maximizing your total retirement savings matters more than immediate tax deductions. These contributions allow you to bypass the standard $24,500 limit. You can push more capital into an environment where it accumulates gains without annual taxation until withdrawal.

The IRS caps the total additions made to your 401(k) each year. For 2026, the combination of your elective deferrals (excluding catch-up contributions), employer matches, and your after-tax contributions cannot exceed the lesser of $72,000 or 100% of your compensation.

When you eventually withdraw non-Roth after-tax funds, the original contribution amount comes out tax-free because you already established a "tax basis." However, the IRS taxes any investment growth on that money as ordinary income.

How do after-tax 401(k) contributions work in practice?

To see exactly how this works, consider a specific scenario. Let’s say your employer sponsors a 401(k) plan with a 50% company match. Your 2026 salary is $150,000, you are under age 50, and your plan allows non-Roth after-tax contributions.

First, you max out your elective deferral limit by contributing $24,500 to your traditional 401(k) account. Because of the 50% match, your employer adds a contribution of $12,250.

At this point, you want to invest more. Based on the $72,000 maximum total limit, you calculate your remaining allowance by subtracting your deferrals ($24,500) and the employer match ($12,250). This leaves you with a maximum allowed after-tax contribution of $35,250.

You decide to make a $10,000 after-tax contribution. Here is how the taxes break down:

• Your initial $24,500 pre-tax contribution avoids federal income tax but incurs FICA tax.
• Your employer’s $12,250 match is completely exempt from both federal income and FICA taxes.
• Your $10,000 after-tax contribution faces federal income and FICA taxes. However, it establishes a $10,000 tax-free withdrawal basis for your future retirement.

Take the next step toward financial freedom

If you currently max out your standard elective deferrals, non-Roth after-tax 401(k) contributions offer a powerful way to expand your retirement nest egg. At SD Mayer, we help professionals navigate these complex tax strategies in plain language. Our team of experts will review your unique financial landscape and help you determine the most profitable path forward.

Frequently Asked Questions (FAQ)

What is the maximum 401(k) contribution limit for 2026?

For 2026, the individual elective deferral limit is $24,500. However, the total contribution limit—which includes your deferrals, employer matches, and any non-Roth after-tax contributions—is $72,000.

Are after-tax 401(k) withdrawals taxable?

The original non-Roth after-tax contributions form a tax basis, meaning you can withdraw the principal amount tax-free. Any investment growth generated by those contributions is taxable as ordinary income upon withdrawal.

Do nondiscrimination rules affect after-tax 401(k) contributions?

Yes. The IRS enforces complex nondiscrimination rules to prevent 401(k) plans from exclusively benefiting highly compensated employees over rank-and-file workers. While these rules rarely prevent an employee from making after-tax contributions, specific company plan exceptions can apply.