However, the IRS allows you to contribute up to a total of $70,000 in 2025 ($77,500 for adults 50 to 59 and 64 or older and $81,250 for those aged 60 to 63). This includes salary-deferred contributions to your traditional and Roth 401(k), any employer match contributions, and any after-tax contributions.
After-tax contributions are also a great option for those who need to withdraw funds before age 59 1/2 and don't have a Roth retirement account. Traditional 401(k) withdrawals require you to pay taxes plus a 10% early withdrawal penalty for doing this. If you withdraw only your after-tax contributions, you won't have to worry about those extra costs. However, after-tax 401(k) earnings are still subject to the usual taxes and penalties.
Cons of after-tax 401(k) contributions
Your plan may not allow after-tax 401(k) contributions. Always check with your company about whether this is an option before exceeding the annual 401(k) contribution limit.
The biggest downside to these contributions is that you still owe taxes on your earnings even though you don't have to pay them right away. You can minimize your taxable earnings by rolling the funds over into a Roth 401(k) or a Roth IRA, but not all plans allow current employees to do this.
After-tax 401(k) contributions can make sense for certain people, but it's important to first make sure you're eligible and then weigh all other options before doing so. If you have access to an IRA, for example, you may prefer to stash extra savings there first so you can reap the tax advantages these accounts offer before putting extra money into your 401(k).
