# Difference between Roth 401k and After-tax 401k

In this post you will learn :

• Why invest in Roth401k vs traditional401k
• Difference between Roth401k and aftertax 401k
• Is the after401k for you

For the last few years, I have been contributing to my Roth-401k instead of my traditional 401k. It ends up the same, except for the fact that Roth-401k allows you to save more since the limit is the same for Roth401k and traditional 401k.

Now my employer allows me to contribute to an after-tax 401k. Let's see the difference between the Roth 401k and Aftertax 401k.

Roth 401k:

• Contribution limit is 18000$(2016) [1]. • Withdrawal for contribution and earnings not taxed (assuming it's a qualified distribution). After-tax 401k • Contribution limit is 53000$ and includes:
• 401k (roth or traditional) + employer match + aftertax 401k. [1]
• Withdrawal for contributions not taxed
• Withdrawal for earnings are taxed. This is the most important distinction.

Both Roth-401k and After-tax 401k must follow the 401k distribution rules:

• Done after age 59 ½ without penalty
• Money held for 5 years in account
• Need minimum required distributions

## What to do with an after-tax 401k:

The trick here is to rollover your aftertax 401k contribution to a Roth IRA plans. This way you can have earning withdrawal without any taxes.[2] Roth IRA also doesn't have the minimum required distribution.

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