When we think about 401(k)s, most advisors focus on two things: helping clients capture the company match and exploring whether Roth 401(k) contributions make sense. Those are great starting points — but they’re far from the full picture.
The truth is, most clients can contribute far more to their 401(k)s than they realize. And understanding how to take advantage of that can open up powerful planning opportunities.
Beyond the Basics: What the IRS Really Allows
In 2025, the total allowable 401(k) contribution (between employee and employer) is $70,000 — and it jumps to just over $81,000 in 2026. Yet many people stop at the familiar $23,500 (plus catch-up). Why? Because few know that after-tax contributions can push those totals much higher.
If your client’s plan allows it — and many do — after-tax contributions can be made on top of pre-tax or Roth deferrals. These dollars still grow tax-deferred inside the plan. When the time comes to roll the funds out, the after-tax portion can be moved directly into a Roth IRA, setting the stage for tax-free growth going forward.
The Strategy: After-Tax + Roth Conversion
Here’s where it gets interesting. After-tax contributions can be converted to Roth dollars — sometimes even inside the 401(k) itself if the plan allows for “in-plan conversions.”
The process is simple:
- Contribute after-tax dollars.
- Convert them to Roth almost immediately (to minimize taxable gains).
- Enjoy tax-free growth from that point forward.
Yes, each conversion triggers its own five-year rule, but remember: contributions themselves can always be withdrawn tax-free. It’s the earnings that are subject to penalty and tax before age 59½.
If your client is already maxing out Roth 401(k) contributions, this after-tax-to-Roth conversion (often called a mega backdoor Roth) is one of the most efficient ways to build additional tax-free wealth.
A Hidden Gem for Federal Employees: The Voluntary Contribution Program
For advisors with federal employee clients — especially long-time CSRS participants — there’s another incredible strategy: the Voluntary Contribution Program (VCP).
Here’s how it works:
- The employee requests a lifetime earnings estimate from OPM, typically about 60 days before retirement.
- They can contribute up to 10% of their lifetime earnings into the VCP using after-tax dollars.
- Roughly 30 days after retirement, those funds can be rolled directly into a Roth IRA.
Because the VCP earns minimal interest, the tax impact is negligible — and the conversion creates a substantial tax-free asset for retirement. It’s one of the most overlooked opportunities in the federal benefits world.
Help Clients Think Bigger About Retirement Savings
Most clients are saving more than ever, and many are looking for smart, tax-efficient ways to do it. The strategies above — after-tax 401(k) contributions, in-plan Roth conversions, and the VCP for federal employees — deserve a place in your client conversations, your content, and your campaigns.
Use them in your podcasts. Share them in newsletters. Record a short YouTube explainer. These are the kinds of actionable insights that separate great advisors from good ones.
And as the year winds down, start thinking ahead — not just about 2025, but about how these strategies fit into your clients’ 2026 goals and beyond.
