My almost-megacorp has recently added the capability to add funds to an non-ROTH after-tax 401k (>20k in addition to the 17.5k present limit on the tax-deductible portion). I have not yet ascertained whether in-service distributions go along with this (although the e-mail stating this new benefit did seem to suggest such).
My understanding is that that the primary benefit of an after-tax 401k is to take frequent in-service distributions and convert after-tax money to a ROTH IRA.
I am presently maxing out contributions to the tax-deductible portion of the 401k, accessing a non-deductible IRA to ROTH conversion each year, and adding considerable money to after-tax accounts. I would additionally have the capability to fully utilize this new after-tax 401k space.
Income is reasonable relative to expenses, age is mid-30s, and I am aiming for the possibility of quite early retirement (or rather, financial independence).
I'm presently undecided on whether this benefit offers real advantages in my circumstances. If I were to only access money at standard retirement age, the long-term tax-free compounding would be quite useful. On the other hand, even in a much shorter timeframe (+5yrs), I could always access the initial converted capital with no penalties. Yet doing this does add potential complexity to finances, which I try to keep simple.
I've read a bit on the topic and there doesn't seem to be any driving reason to either partake or not partake in this benefit.
Have others used after-tax non-ROTH 401k options? If so, what drove that decision?
And am I missing anything major that could help refine my decision process?
Thanks in advance -
My understanding is that that the primary benefit of an after-tax 401k is to take frequent in-service distributions and convert after-tax money to a ROTH IRA.
I am presently maxing out contributions to the tax-deductible portion of the 401k, accessing a non-deductible IRA to ROTH conversion each year, and adding considerable money to after-tax accounts. I would additionally have the capability to fully utilize this new after-tax 401k space.
Income is reasonable relative to expenses, age is mid-30s, and I am aiming for the possibility of quite early retirement (or rather, financial independence).
I'm presently undecided on whether this benefit offers real advantages in my circumstances. If I were to only access money at standard retirement age, the long-term tax-free compounding would be quite useful. On the other hand, even in a much shorter timeframe (+5yrs), I could always access the initial converted capital with no penalties. Yet doing this does add potential complexity to finances, which I try to keep simple.
I've read a bit on the topic and there doesn't seem to be any driving reason to either partake or not partake in this benefit.
Have others used after-tax non-ROTH 401k options? If so, what drove that decision?
And am I missing anything major that could help refine my decision process?
Thanks in advance -
