The 401(k) Feature Most High Earners Never Turn On
Maxing out your 401(k) feels like finishing. You hit the number, payroll confirms it, and the task is done for the year.
For a lot of high earners, it isn't finishing. It's getting about a third of the way there.
In 2026 the limit on what you can defer from your paycheck is $24,500. But that is not the limit on what can go into your 401(k). The total that can land in your account in a year — your deferrals, your employer's contributions, and anything else — is $72,000.1
That gap is real money, it is available every year, and most people never find out it exists.
Where the gap comes from
Two different limits govern a 401(k), and they get confused constantly.
The first is the elective deferral limit: $24,500 in 2026. That's your money, out of your paycheck, and it's the number everyone knows.
The second is the annual additions limit: $72,000. That covers everything that goes into your account from every source. Subtract your deferral and whatever your employer puts in, and whatever is left is room nobody is using.
If you earn $250,000 and your employer matches 5%, the arithmetic looks like this: $72,000 minus your $24,500 deferral minus $12,500 of match leaves $35,000 of unused room. With no employer contribution at all, it's $47,500.
How you actually get money into it
The mechanism is called an after-tax contribution, and it is not the same thing as a Roth contribution, which is the first place this gets confusing.
After-tax contributions go in with money you've already paid tax on. Left alone, their growth would eventually be taxed as ordinary income — which is a mediocre deal. The move is not to leave them alone. It's to convert them to Roth, either inside the plan or by rolling them out, and ideally soon after they go in, so there is almost nothing to tax on the way.
Do that consistently and you are moving tens of thousands of dollars a year into an account that grows and comes out tax-free in retirement. That's the whole idea, and the industry's unhelpful name for it is the mega-backdoor Roth.
The catch: your plan has to allow it
This is where most of these conversations end, and it's why so few people use it.
Your plan needs two separate features. It has to permit after-tax contributions beyond the regular deferral limit. And it has to permit either in-plan Roth conversions or in-service distributions, so the money can actually get to Roth rather than sitting there.
How common is it? About 36 percent of plans allowed in-plan Roth conversions at the end of 2025 — and where the feature was offered, roughly 4 percent of participants used it.2
Read that second number again. Even among people whose plans already permit this, almost nobody does it. Some of that is genuine unsuitability. Most of it is that nobody knew.
Some plans offer one feature and not the other, which is the frustrating case, because after-tax contributions are close to useless without a way to convert them.
You will not find this in the benefits summary. It lives in the plan document.
How to find out in five minutes
Call your plan provider or your HR benefits contact and ask three questions in this order:
- Does the plan allow after-tax contributions above the elective deferral limit — not Roth contributions, after-tax contributions?
- Does it allow in-plan Roth conversions, or in-service distributions of after-tax money?
- How much after-tax room do I have this year, given my deferrals and the employer contribution?
Ask them exactly that way. The distinction in the first question is the one that gets mixed up most often, including by people whose job it is to know.
Before you turn it on
A few things worth thinking through.
This is money that leaves your paycheck and does not come back until retirement, so the cash flow has to work without it. If converting means stopping something else that matters more — an emergency fund that isn't built yet, a mortgage you want gone — this isn't automatically the priority.
Timing matters too. The longer after-tax money sits before conversion, the more growth accumulates, and that growth is taxable when you convert. Converting promptly keeps it clean. Some plans automate it; if yours does, use that.
And if your income is uneven — a big vest year, a bonus that lands in March — the room changes with it. Worth recalculating rather than setting a percentage in January and forgetting about it.
One more change for 2026
While you're asking about the plan: if you're 50 or older and your FICA wages from that employer were above $145,000 last year, your catch-up contributions must now go in as Roth rather than pre-tax. Treasury and the IRS issued the final regulations in September 2025.3
The timing on this gets muddled constantly, so it's worth being precise. The requirement itself applies from January 1, 2026 — that part is the law today. The final regulations don't formally take effect until 2027, and in the meantime plans are expected to apply a reasonable, good-faith interpretation.4
What that means for you: it applies this year, and your plan may still be working out exactly how it handles the mechanics. Some plans have responded by dropping catch-up contributions altogether rather than build the Roth machinery. Worth knowing which camp yours is in.
There is no opting out of the Roth treatment if you're over the threshold and your plan offers catch-up at all.
Most people in that position haven't heard about it yet. It's worth a look at your own paystub.
The point
The 401(k) is the floor, not the plan. For someone earning well, maxing the deferral and stopping there leaves a large, repeatable opportunity unused every year — and the only reason most people miss it is that nobody ever told them the second limit existed.
Five minutes with HR will tell you whether your plan can do this. If it can, the next question is whether it should be your next dollar, and that depends on everything else you have going on.
If you want to work through whether this fits your situation, I'd welcome the conversation.
Sources
- IRS.gov, November 13, 2025.
- NAPA-Net.org, June 16, 2026.
- IRS.gov, September 15, 2025.
- NAPA-Net.org, September 29, 2025.