Why Didn't You?
Most advisors know the familiar 401(k) limits: $23,500 for employee deferrals, plus a $7,500 catch-up for those 50 or older. Some have caught the latest update that allows an even larger catch-up: up to $11,250 for ages 60–63.
But here’s the truth: the real maximum 401(k) contribution for 2025 is $70,000 (and even higher in 2026). That’s the combined total between employee and employer contributions — and it’s where real planning opportunities begin.
Beyond the Deferral: After-Tax Contributions
The biggest missed opportunity for both employees and business owners comes from after-tax contributions.
If your client’s 401(k) plan allows it (and many do) after-tax dollars can be added on top of pre-tax or Roth deferrals.
These contributions grow tax-deferred inside the plan, and when it’s time for a rollover, the after-tax portion can go directly into a Roth IRA — where it continues to grow tax-free.
For advisors who want to elevate their value and deepen client relationships, this is the kind of strategy that separates a planner from a partner.
The Strategy: The “Mega Backdoor Roth”
Here’s where the magic happens. After-tax 401(k) contributions can be converted into Roth dollars — often within the plan itself if it allows “in-service distributions.”
The process looks like this:
- Contribute after-tax dollars to the 401(k).
- Convert them to Roth dollars almost immediately (to minimize taxable gains).
- Let those funds grow tax-free from that point forward.
Each conversion has its own five-year clock, but remember: the contribution portion can always be withdrawn tax-free. It’s the earnings that are subject to taxes and penalties before age 59½.
If your client is already maxing out Roth 401(k) contributions, this “mega backdoor Roth” strategy can dramatically increase the amount of money compounding tax-free — often tens of thousands of dollars per year.
Why This Matters for Advisors Who Think Like Business Owners
Great advisors deliver service.
But business owners — the kind of professionals who build scalable, referable, and profitable firms — deliver insight.
When you bring clients strategies like after-tax contributions, in-plan conversions, or Roth rollovers, you’re doing more than giving advice. You’re positioning yourself as a strategist who helps clients make business-owner-level decisions about their wealth.
And remember: if you’re not talking about these opportunities, someone else is.
Takeaway: Think Bigger, Act Like an Owner
Helping clients discover that they can contribute up to $70,000 in a 401(k) isn’t just a technical update; it’s a reminder of your role as a financial leader.
You’re not just there to make sure they get the match. You’re there to help them maximize what’s possible.
Because that’s what business owners do: they see beyond the basics.
