After Tax 401K Is Not A Roth 401K

In the first year with my former employer, I contributed a little too much into my 401K and about $300 went into what was called an “after tax 401K.” This was before the advent of the Roth 401K and so I hadn’t even thought about what you would do with a post-tax 401K in the first place. After some research though I quickly discovered what the heck this After Tax 401K was… it’s like a Roth 401K without the awesome tax benefit.

Contributions to an after tax 401k are made with post-tax dollars, obviously, and the principal can be withdrawn tax free… but the earnings will be taxed. Basically… it’s a catch all bucket for extra contributions.

Is there any benefit to an after tax 401K? Yes, if you have specialty funds or cheap fees that you wouldn’t otherwise get if you were to invest that money elsewhere. If you really like your 401k, putting your money into an After Tax 401k might be a good idea. Or you might just be in it because you saved too much. 🙂