After-Tax 401(k) vs. Roth 401(k): What’s the Difference
If you’ve ever looked at your 401(k) portal and thought, “Wait… after-tax and Roth are both after-tax, right?”—you’re not alone. This is one of the most common points of confusion we see at Allset Wealth.
They sound similar, but they work very differently.
Roth 401(k) contributions
You contribute after-tax dollars.
If you follow the rules, qualified withdrawals are tax-free (contributions + earnings).
After-tax 401(k) contributions (non-Roth)
You also contribute after-tax dollars.
But the account is not automatically tax-free later:
Your contributions (basis) generally come out tax-free
Earnings generally come out taxable (unless you convert/roll them strategically).
That single difference—tax treatment of earnings—is why these two buckets are not interchangeable.
“If both are after-tax, why would anyone do after-tax 401(k) contributions?”
This is one of the most common questions.
The main reason: you want to save more than the standard 401(k) limit.
For 2026, the employee 401(k) deferral (Traditional + Roth 401(k)) limit is $24,500 (not counting catch-up rules).
The total limit for employee + employer + after-tax contributions is $72,000 (not counting catch-up rules).
After-tax contributions let high savers take advantage of the gap between what you’ve already maxed out in employee 401(k) deferrals and the plan’s total annual limit.
Example (simple math)
Assume for 2026:
You max your Roth or pre-tax 401(k): $24,500
Your employer adds match/profit sharing: $10,000
Annual additions limit: $72,000
Potential after-tax room:
$72,000 − $24,500 − $10,000 = $37,500
That’s why after-tax contributions show up most often for:
high-income earners
strong savers
The “mega backdoor Roth”: where after-tax 401(k) gets powerful
After-tax contributions become far more attractive if your plan lets you convert them to Roth and reduce “earnings getting taxed later.” This is the basic idea behind the “mega backdoor Roth.”
If you’re over the Roth IRA income limit, consider a Backdoor Roth IRA
If your plan doesn’t allow a mega backdoor Roth, consider a backdoor Roth IRA instead. If your income is too high to contribute directly to a Roth IRA, a backdoor Roth is often the next-best way to build Roth assets.
How to tell if your 401(k) supports after-tax + mega backdoor Roth
Ask your HR/recordkeeper these exact questions:
Does the plan allow “after-tax (non-Roth)” employee contributions?
Does it allow in-plan Roth conversions? (after-tax → Roth 401k)
Does it allow in-service withdrawals/distributions of after-tax money? (so you can roll to a Roth IRA)
How often can I convert/withdraw? (every paycheck? monthly? quarterly?)
Are earnings separated from basis in the transaction? (mechanics matter for taxes)
If the answer to #1 is “no,” the mega backdoor Roth generally isn’t available through that plan.
Disclosures: This article is for educational purposes only and is not individualized tax, legal, or investment advice. Rules can change and plan provisions vary—please consult your tax professional and/or financial advisor about your specific situation.