High Earners Can Shelter Up to $47,500 More in Roth Accounts if 401(k) Plans Allow It
Updated
Updated · 24/7 Wall St. · May 22
High Earners Can Shelter Up to $47,500 More in Roth Accounts if 401(k) Plans Allow It
3 articles · Updated · 24/7 Wall St. · May 22
$40,000 of extra annual Roth-bound savings opens up for a 45-year-old earning $250,000 who already maxes a 401(k) and gets a 3% match; at age 50, catch-up rules lift the added room to about $47,500.
The strategy uses the gap between the 2026 elective deferral limit of $24,500 and the 401(k) total annual addition cap of $72,000, filling the unused space with after-tax employee contributions.
Fast conversion is the key step: moving those after-tax dollars into a Roth source the same pay period keeps taxable gains minimal, while 20 years of $40,000 contributions at 7% could build roughly $1.6 million in tax-free assets.
Only plans that allow both after-tax non-Roth contributions and either in-plan Roth conversions or in-service rollovers can support the maneuver, and Vanguard data says just 25% to 30% of large plans have both features.
The trade-off is cash flow and access: directing $40,000 a year into the plan cuts take-home pay by about $3,300 a month, and Roth conversion amounts generally stay locked up until age 59.5 under five-year rules.
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