Understanding the Three Buckets of 401(k) Contributions

By Liam Collins on October 31, 2025

Many view 401(k)s as a choice between pre-tax and Roth contributions. But there’s a third, often overlooked option that can significantly boost retirement savings; especially for high earners who max out standard limits.

There are three “buckets” that 401(k) contributions fall into; 1. Pre-tax (traditional) 2. After-tax (Roth) 3. After-tax (non-Roth).

Most are familiar with the first two. Traditional contributions are deductible, grow tax-deferred, and are taxed on withdrawal. Roth contributions are not deductible, grow tax-free, and are withdrawn tax-free if qualified.

Someone choosing between Roth and traditional contributions might start their analysis by asking, “Do I expect my tax rate to be lower or higher after I retire?” If you expect it to be higher, it makes sense to pay taxes now and choose Roth. If lower, it’s probably better to defer the taxes by contributing to your traditional bucket.

For example, a young medical resident might start with Roth contributions and switch to pre-tax once their income jumps after becoming board-certified. If they have more income than they know what to do with, they may even want to consider layering on after-tax (non-Roth) contributions.

This brings us to the third, lesser-known contribution bucket: after-tax (non-Roth) contributions. These contributions are post-tax, have tax-deferred growth, and are taxed upon withdrawal. In other words, a pre-tax contribution without the benefit of a salary deduction. So, why would anyone choose to contribute this bucket?

1. The first reason to consider after-tax non-Roth contributions is the expanded contribution limit. While Roth and traditional contributions are capped at $23,500 in 2025 (with higher thresholds for those over 50 or between ages 60 and 63),¹ the overall 401(k) limit—including employer match and after-tax contributions—reaches up to $81,250.² After-tax contributions let you fill that gap once you’ve maxed out your Roth or traditional deferrals.
2. The second reason is the ability to convert those after-tax dollars into Roth through the “mega backdoor Roth” strategy. Because the contributions are already taxed, converting them does not trigger additional income tax. Once converted, the funds grow and can be withdrawn tax-free, just like regular Roth contributions. This can be done either within the plan or by rolling the funds into a Roth IRA.

Not all plans allow after-tax contributions or in-service conversions, so it is important to check with your plan administrator. Timing matters too; if you wait too long to convert, growth on the after-tax contributions could be taxed when you convert. But if you’re a high-earner and you’re serious about maximizing your retirement savings, careful and strategic use of after-tax contributions can be a powerful tool for achieving your retirement goals.

1. https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000 ↩︎
2. https://www.irs.gov/pub/irs-drop/n-24-80.pdf ↩︎