After-tax 401k contribution

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Mtmp8888
Posts: 14
Joined: Mon Jan 13, 2020 9:15 pm

After-tax 401k contribution

Post by Mtmp8888 » Tue Jan 14, 2020 7:04 pm

My employer 401k accepts before-tax, Roth, and after-tax contribution. 401k plan also allows rollover of after-tax contribution to Roth IRA account once per quarter.

Say your tax rate is 20%, would you just do after-tax contribution since January 1 and once per quarter rollover after-tax contribution $ to Roth IRA while still contributing max to Roth IRA?

I understand that with this, I’m not going to have any 401k contribution deduction but somehow I feel that it’s worth to build Roth as much as possible for the free tax growth benefit.

What do you all think?

sailaway
Posts: 953
Joined: Fri May 12, 2017 1:11 pm

Re: After-tax 401k contribution

Post by sailaway » Tue Jan 14, 2020 7:26 pm

Does your company have any match? If so, does it apply to after tax? If there is a match, but only for traditional or Roth, get the match. If Roth makes sense for you, just do the 401k Roth to get the match, then fill up the after tax.

Does your state provide the same protections to 401ks and IRAs? If not, again, even if it is Roth, you would likely want a significant amount in the 401k.

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