After-tax 401(k).
In plain English
An after-tax 401(k) contribution is a third bucket some workplace plans allow, on top of pre-tax and Roth contributions. You put in money you have already paid tax on, above the regular employee limit, up to a much higher total cap that includes employer contributions. On its own it is not a Roth, but many plans let you convert those after-tax dollars into a Roth, a move called the mega backdoor Roth. It only works if your specific plan offers both after-tax contributions and in-plan conversions or withdrawals.
01Why it matters
For high earners whose plan allows it, after-tax 401(k) contributions can open the door to tens of thousands of extra Roth dollars a year.
02The math, step by step
After maxing the regular 401(k) limit, a worker adds 20,000 dollars of after-tax contributions, then converts them to Roth, so future growth comes out tax-free.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
An after-tax 401(k) contribution is NOT the same as a Roth 401(k). A Roth is taxed now and grows tax-free automatically; a plain after-tax contribution grows taxable unless you convert it to Roth.
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