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After-Tax 401K Contributions: How They Help with 2023 Retirement Savings

After-Tax 401K Contributions [Photo: CNBC]
After-Tax 401K Contributions [Photo: CNBC]

If an employee decides to maximize their retirement benefits, it is suggested that they utilize after-tax 401k contributions. In this article, read and find out how to save more with your retirement plans!

After-Tax 401K Contributions [Photo: Yahoo Finance]

After-Tax 401K Contributions [Photo: Yahoo Finance]

The after-tax 401k contributions is another option if an employee wants to maximize their retirement savings for 2023. This year, an employee can defer up to $22,500 into their 401k contributions. Savers who are aged 50 and older can also add another $7,500. In addition, some other plans authorize even more savings through the after-tax 401(k) contributions.

According to Dore, however, the total contributions limit for 2023 is up to $66,000. This limit includes profit sharing, deferrals, the company match, and other deposits from the employer. In 2021, reports say around 14% of the employees maximized their 401k plans, with 1,700 plans and almost 5 million participants.

READ ALSO: Newsbreak: Almost Half Of Americans Approaching Retirement Age Have No Savings

Difference between After-Tax 401K Contributions and Roth Accounts

According to Royal, while part of the paycheck after taxes can be deferred in both the after-tax 401k contributions and Roth accounts, there are still some major differences between the two. In 2023, employees under the age of 50 can defer up to $22,500 of their salary into their Roth accounts or regular pretax.

On the contrary, after-tax 401k contributions can be added to the traditional 401k plans which allows an employee to save more than the $22,500 limit. For instance, if an employee defers $22,500 and their employer contributes $8,000 for profit-sharing and matches, the employee can save an additional $35,500 before reaching the $66,000 limit in 2023.

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