Maxing out 401K Question

[wkumtrider]

When talking about maxing out the 401k, is that usually interpreted as maxing out the pre-tax amount ($19500) or both pre and after-tax amounts?  I didn't realize until about a month ago you could contribute after-tax to a 401k.  So was just curious if most MMMers max the pre-tax amount or both pre and after tax. 

Thanks!

[MetalCap]

Not all providers allow after tax contribution (different than Roth).

The 19,500 is any combination of Pre-Tax and Roth contributions by the employee per year (2021 level).
After Tax level is up to 58,000 but that amount also includes any Pre-Tax, Roth and employer contributions as well.

I max out the 19,500 (I choose to follow MadFientist and dump into pre-tax) and am looking to start after tax this year since this is the first time my employer made it available.  I won't be up to the full 58k.

Also my employer warned to be careful about front loading after tax, if you max out the 58k before your employer provides their contribution, they're not allowed to contribute and you'll lose out on that free money.

Hope that clarifies things.

[wkumtrider]

Thanks MetalCap, that does help.  Apparently my employer allows after tax contribution when you max out the pre-tax amount.  I noticed on my last paycheck this past December that my 401K contribuion was after-tax.  I maxed out the pre-tax on the previous paycheck.

[phildonnia]

Just to be clear, the $19500 limit applies to all contributions together.  You can't contribute $19500 each to both before- and after-tax.  But you can split it up however you like.

I had already accumulated a large before-tax 401(k) before my employer offered the Roth option.  I switched over, and now I have some of each.  I presently contribute the max to the after-tax option only. 

I'm currently "front-loading" because I expect to FIRE this year.  But I'm aware of what MetalCap pointed out: if your employer match is at the max, then you're getting less, since they won't match for those pay periods in which you can't make any more contributions.

By the way, employer matches are always "before-tax", even if your own contributions are "after-tax".

If you really want to go hardcore, you should also contribute $6k to a separate Roth IRA of your own.  I'm turning 50 this year, so I also get to do "catch-up" contributions.  My take-home pay is like $50 a month.

[Proud Foot]

@phildonnia, Roth and after-tax contributions are two separate items. The IRS sets a cap ($19,500) for contributions that get tax preferred treatment (either Traditional or Roth) most plans do not allow you to make any contributions after you this the cap. There are some who allow for after-tax contributions above and beyond the IRS cap. What this means is you pay tax on your contributions and then you pay tax on the growth when you start making withdrawals or roll it to a Roth. This is especially advantageous if the plan allows in-service rollovers and you can roll those after tax contributions to Roth This is what is considered a mega-backdoor Roth.

[reeshau]

This is especially advantageous if the plan allows in-service rollovers and you can roll those after tax contributions to Roth This is what is considered a mega-backdoor Roth.

Even if you can't do an in-service rollover, you have the opportunity when you rollover your whole 401k to an IRA to split your after-tax contributions (but not their earnings) to a Roth, to simplify the accounting for any further mega backdoor rollovers you want to do afterward.

[phildonnia]

@phildonnia, Roth and after-tax contributions are two separate items.

Ok, we're talking about non-deductible contributions to a traditional 401(k)?  If that's the case, ignore all I said about Roth 401(k)s.