How to Put Way More Than $24,500 in Your 401(k)

Ask almost anyone what the 401(k) limit is and you'll hear the same number: $24,500.

That number is correct. It's also answering a question nobody asked.

Because $24,500 is the limit on one specific category of contribution — the money you elect out of your own paycheck. The actual ceiling on what can land in your 401(k) this year is $72,000.

That's roughly a $47,500 gap that most people never learn exists, and for some employees it's sitting there completely unused.

Let's find it. 👇

That last row is the one that matters. The annual-additions limit is the lesser of $72,000 or 100% of your compensation, and it counts:

Two things it does not count: catch-up contributions (they sit outside the $72,000) and rollovers from an old plan.

Traditional and Roth 401(k) do NOT give you two limits.

They share the same $24,500. This works:

This does not:

Roth is a tax treatment, not a second bucket. Choosing Roth changes when you pay, not how much you can put in.

And the related trap: two jobs don't give you two deferral limits either. Elective deferrals are aggregated across all your employers' plans. $24,500 at Job A plus $24,500 at Job B is an excess deferral, and untangling it after year-end is genuinely unpleasant. Changing jobs mid-year is exactly when this happens — the new payroll system has no idea what the old one did.

Here's the distinction that unlocks everything, and it trips up even finance people:

Read the third row again. After-tax contributions are taxed like Roth but don't consume your deferral limit. They only eat annual-additions space.

That's not a loophole someone discovered. It's two separate limits in the code doing exactly what they were written to do.

45 years old, earning $200,000, at a plan with the right features:

The employee never exceeded $24,500 in elective deferrals. Not by a dollar. They just used the other categories.

And note what a bigger match does: if the employer had put in $25,000 instead of $15,000, after-tax room would shrink to $22,500. Generous employer contributions eat your own after-tax space. Good problem, but a real one.

Age 50+? The catch-up sits outside the $72,000 — so $72,000 + $8,000 = $80,000 is theoretically possible. Ages 60–63 with the super catch-up: $83,250.

After-tax money sitting in a 401(k) is fine but not great — contributions are already taxed, and future earnings are taxable later. The magic is moving it to Roth.

The timing detail that decides how well this works: your after-tax contribution is already taxed, so converting it creates little or no income. But any earnings on it before conversion are taxable when converted.

Which is why the gold-standard plan feature is automatic in-plan Roth conversion — every after-tax dollar flips to Roth the moment it lands, with essentially zero earnings to tax. If your plan has it, turn it on and stop thinking about it.

If you're rolling to IRAs instead, there's a useful rule: you can generally split the distribution — after-tax basis to the Roth IRA, the taxable earnings to a traditional IRA — so the earnings don't trigger tax now. Ask your administrator specifically about splitting.

Here's why a plan might offer after-tax contributions and still not let you use much of that space.

After-tax employee contributions are subject to nondiscrimination testing (the ACP test). In plain English: if the rank-and-file employees don't use the feature much, highly compensated employees get capped or refunded.

What that looks like in real life:

So "my plan allows after-tax contributions" and "I can actually put $32,500 in" are two different statements. Ask about the cap, not just the feature.

$72,000 isn't a number everyone can reach. The limit is the lesser of $72,000 or 100% of compensation.

Earning $50,000? Your annual-additions ceiling is $50,000, not $72,000 — and you'd have to live on approximately nothing to get there. There's also a separate $360,000 compensation limit for 2026 used in certain plan calculations, which caps how much salary can be counted for things like profit-sharing formulas.

Translation: this strategy is structurally aimed at high earners with serious cash flow. Which is fine — just don't read "$72,000" as a target if your income can't support it.

This comes up constantly, especially at universities, hospitals and government employers: "I'm required to put 4.5% of every paycheck into the plan. Does that eat my $24,500?"

The honest answer: it depends entirely on how the plan document classifies it, and the fact that it comes out of your paycheck does not settle it.

That second case is real and it's why these arrangements exist. But it is a plan-document question, not an internet question.

So don't ask HR "is it extra?" Ask: "Is this contribution classified as an elective deferral, a mandatory employee contribution under a one-time irrevocable election, or an employer contribution?" That sentence gets you a real answer.

This one is genuinely underused.

The $24,500 deferral limit follows you personally across every employer. But the $72,000 annual-additions limit generally applies per employer — as long as the employers are truly unrelated and not part of a controlled group.

So someone with a W-2 job and legitimate self-employment income on the side may be able to:

The controlled-group rules are real and unforgiving, and the deferral aggregation is absolute. But for consultants, physicians with 1099 work, and anyone running a genuine side business, this can be worth far more than the mega backdoor Roth.

1. Front-loading without a true-up. Match is usually calculated per paycheck. Hit your $24,500 by August and, in a plan without a true-up provision, you get zero match from September through December. Thousands of dollars, gone, for being early. One question to HR: "does our plan true up?"

2. The SECURE 2.0 Roth catch-up rule, live in 2026. If your prior-year wages from that employer exceeded $150,000, your catch-up contributions generally must be Roth. You may be doing Roth catch-ups whether you chose to or not — worth checking your payroll election.

Don't ask "can I contribute more than $24,500?" Ask these:

The document with the answers is your Summary Plan Description. Search it for: after-tax, voluntary after-tax, in-plan Roth rollover, annual additions, true-up.

Before you chase $72,000, notice what after-tax contributions actually are: money you've already paid tax on, locked into a retirement account, with no deduction.

The payoff is real — decades of tax-free growth once it's Roth, on money that could never have gotten there otherwise. But it competes with:

Sane order: full match → high-interest debt → emergency fund → HSA → max deferral → then after-tax/mega backdoor.

And one more thing: locking money behind 59½ has a cost. If everything you own is in retirement accounts, you've optimized taxes and lost flexibility. Some liquidity is worth more than some tax efficiency.

"The 401(k) limit" was never one number. It's four:

The gap between the first and last is where the whole opportunity lives — through employer contributions you don't control, and after-tax contributions you do.

The tax code sets the ceiling. Your plan document decides how much of it you're allowed to reach. Two people at two companies, identical salaries, can have wildly different answers — and that's why online arguments about this never resolve. Everyone's describing their own plan.

Go read your Summary Plan Description. It's the most boring document that has ever been worth tens of thousands of dollars a year.

See you next issue. 🪙

Penny Brief is for informational and educational purposes only and is not individualized tax, legal or investment advice. 2026 figures reflect current IRS guidance: a $24,500 elective-deferral limit; $8,000 age-50 catch-up; $11,250 catch-up for those turning 60–63 during the year; a $72,000 annual-additions limit (the lesser of that amount or 100% of compensation); a $360,000 annual compensation limit; and the SECURE 2.0 rule generally requiring Roth catch-up contributions where prior-year wages from the employer exceeded $150,000. Catch-up contributions are generally excluded from annual additions, and rollovers are generally excluded as well. Whether after-tax contributions, in-plan Roth conversions, true-ups or mandatory contributions are available depends entirely on your plan document, and after-tax contributions are subject to nondiscrimination testing that can limit or refund amounts for highly compensated employees. Controlled-group rules govern whether separate employers give separate annual-additions limits. All examples are simplified illustrations. Confirm your specific situation with your plan administrator and a qualified tax professional.

Sources: Internal Revenue Service (401(k) contribution limits, annual additions and Section 415 rules, after-tax and designated Roth contributions, in-plan Roth rollovers, rollover treatment of after-tax amounts, catch-up contributions); SECURE 2.0 Act provisions.