After-tax contribution

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After-Tax Contribution

A contribution made to a retirement plan with money one has left over after paying taxes. That is, when one makes after-tax contributions to a retirement plan, one has already paid taxes on the contribution. As a result, one does not pay taxes on the withdrawals on the plan made after retirement. After tax contributions are made on Roth IRAs and Roth 401(k)s. See also: Pre-Tax Contributions.

After-tax contribution.

An after-tax contribution is money you put into your 401(k) or other employer sponsored retirement savings plan either instead of or in addition to your pretax contribution.

You make an after-tax contribution if you've chosen to participate in a Roth 401(k) or similar tax-free plan rather than a traditional tax-deferred 401(k).

However, if you make excess deferrals, any earnings on the after-tax amount accumulate tax deferred. The disadvantage is that figuring the tax that's due on your required distributions may be more complicated than if you had made only pretax contributions.

References in periodicals archive ?
With the addition of MyLifeNow mobile enrollment, participants can now enroll in their plan, enroll in automatic increase, and adjust their pre-tax, Roth or after-tax contributions, as well as view their account balances, personal rate of return, and investment allocations.
Disbursements containing both pretax and after-tax contributions may be treated as a single distribution.
In 2006, the Roth 401(k) was introduced as a way for Americans to make after-tax contributions to their 401(k) plans.
For example, if 40% of the converted amount reflects after-tax contributions and the client is in a 28% tax bracket, then only 60% of the amount being converted is taxed.
7) Conversions of after-tax contributions from a traditional IRA to a Roth IRA are not includable in gross income, since they previously have been taxed.
The amount of the rollover would be includible in taxable income except to the extent it is the return of after-tax contributions.
Rollover contributions and voluntary after-tax contributions are not employer-provided benefits, and the restrictions on in-service distributions are not applicable to those types of accounts.
The IRA is a rollover from the qualified plan of a current or former employer with no after-tax contributions.
Also, if a super fund member doesn't supply their TFN, super funds are unable to accept any after-tax contributions they make.
An advantage to making after-tax contributions is knowing what the tax risk is.
The act expands the rollover options for after-tax contributions so that such contributions can be rolled over from one qualified retirement plan to another, to a tax-sheltered annuity (403(b) plan) or to an IRA.
1 have monthly after-tax contributions taken from my checking account and deposited into the 529 plans.