How do 401k After Tax Contributions Affect Your Savings?

401k after tax plans are a very good way to save for retirement. Your savings grow tax deferred, and you will never have to pay taxes on the withdrawals after you retire. They also let you enjoy much more freedom than a traditional IRA or 401K. Also, you can create an inheritance fund for your children. You never have to withdraw the money, even after you retire. This is not true with traditional plans.

After tax plans also have advantages over most traditional IRAs. If you have to withdraw funds early because of an emergency, the funds are not taxable. There are generally some taxes and penalties involved, but they are not as severe as they might be with more traditional plans. Even though you can always withdraw the money you invest in any IRA, they are not a good way to save money for the short term. All IRAs are fundamentally designed to save for retirement. It is better to put short term savings in a money market account or CD.