Most people think of two primary 401(k) contribution types:
- Traditional (pre-tax) elective deferrals
- Roth (after-tax) elective deferrals (if your plan permits)
Some plans also allow a third, frequently missed option: after-tax contributions to a traditional (non-Roth) 401(k) account.
Traditional vs. Roth Deferrals
Key 2026 limits and catch-up rules
- 2026 elective deferral limit: $24,500 (generally)
- 2026 catch-up contributions (age 50+): either $8,000 or $11,250, depending on your age
High-compensation rule: if your 2025 compensation exceeded $150,000, your 2026 catch-up contributions must be made to Roth 401(k)
How They’re Taxed
- Traditional elective deferrals generally reduce your current taxable income for federal income tax purposes, but they are still subject to Social Security and Medicare (FICA). The money can grow tax-deferred inside the plan, and withdrawals are generally taxable when distributed.
- Roth 401(k) elective deferrals do not reduce your current taxable income because contributions are made “after tax”, and they are subject to income tax and FICA when contributed. If the distribution is qualified (generally after age 59½ and once the Roth account has been open at least five years), earnings may be distributed income-tax-free.
- After-tax (non-Roth) 401(k) contributions are included in taxable wages and are subject to income tax and FICA (and potentially state and local income taxes). Because they are not Roth contributions, they do not receive full Roth tax treatment.
Why some taxpayers consider after tax contributions to their 401(k):
Some taxpayers consider after-tax contributions because they can create additional saving capacity inside the plan once elective deferrals are already maxed out (including catch-up contributions, if applicable). While the contributions themselves are after tax, any investment earnings can still grow tax-deferred until withdrawal.
Limits: The “total additions” limit for elective deferrals (excluding catch-up contributions), after-tax contributions, and employer contributions cannot exceed the lesser of:
- $72,000, or
- 100% of your compensation
Basis and Withdrawals
After-tax contributions create tax basis in your account because you’ve already paid income tax on those dollars. As a result, the contribution amount can generally be withdrawn tax-free, but any earnings attributable to those contributions are taxable when distributed (unlike qualified Roth distributions, which can be entirely income-tax-free).
Example
Assumptions:
- Your employer’s plan provides a 50% match, your 2026 salary is $150,000, you are under age 50, and the plan permits after-tax employee contributions.
- You contribute the full $24,500 elective deferral limit to your traditional 401(k).
- Your employer contributes $12,250 as a match.
- That leaves up to $35,250 available for after-tax contributions ($72,000 – $24,500 – $12,250).
- You decide to contribute $10,000 after tax.
Your $24,500 of elective deferral contributions are not included in your taxable wages for federal income tax purposes, but they are subject to FICA withholding.
Your employer’s $12,250 matching contribution is exempt from federal income tax and FICA.
Your $10,000 after-tax contribution is included in your taxable income and is subject to federal income tax and FICA. It also creates $10,000 of tax basis in your 401(k) account, which can generally be withdrawn tax-free.
Consideration: Nondiscrimination Testing
401(k) plans must satisfy nondiscrimination rules intended to prevent plans from favoring highly compensated employees over other employees.
In many cases, these rules will not limit after-tax contributions, but they can apply in some situations.
Beyond Elective Deferrals
If you have already maxed out elective deferrals, after-tax 401(k) contributions may offer a practical way to save more for retirement while staying within the plan’s overall annual limits. If you would like help determining whether this strategy fits your tax profile and cash flow, your Wegner tax advisor can walk through your options with you.
