After Tax 401k Contributions vs Roth IRA?

[jIM_Ohio]

I don't agree 100%.

An IRA you can contribute pre-tax or post-tax. Either or. People only make post-tax IRA contributions out of *desparation,* when they have no other tax shelter options. IT's a pretty crappy tax shelter.

A 401k you can do both pre-tax and post-tax. So it's not really apples to apples. No one in their right mind is going to give up the tax shelter of a pre-tax 401k for a post-tax 401k. I certainly wouldn't recommend it. If you want it penalty free, put it in a taxable account. No one keeps good tax records on these and many people end up double taxed with these types of accounts because they didn't keep their tax records for 50 years.

But as I said, I realize now that the post-tax is being presented as an option after the pre-tax 401k is funded. That makes sense. Then it's back to desparation for tax shelters. Crappy, but it works.

Can't an IRA be partially deductible?
That was covered in my tax class last year... something about pre-1982 IRAs or something like that???
If part of my IRA was deductible
and part of my IRA was NOT (maybe not eligible for Roth and used a traditional instead?)

then a distribution is partially taxed and not fully taxed.

As an example of an IRA being partially deductible and partially taxed.

I was not suggesting it be among the top options to consider- but it does have the advantages an IRA does not in terms of age 55 access (if plan allows it).

Yes keeping track of deductible vs non deductible contributions is an issue with this technique. There are lots of issues to discuss (such as is a taxable account better).

I could come up with other examples where highly compensated employees or others might want to consider this option.

[creditcardfree]

This doesn't answer the OP's question, but this year my husband and I will max out our ROTH ira's, but also contribute to my husband's TSP, military's version of 401K. Because his earnings will be in a combat zone, the contributions we make will be after tax contributions, or like a non deductible IRA. When we go to pull money out at retirement our withdrawals will be prorated, with some of the money being taxable and other not taxable.

I was planning to contribute this money, even though there is no tax benefit. The benefit is that this money will be set aside for retirement and invested without paying dividends and capital gains.