401(k) After-Tax Contribution Strategy: What Americans Should Know About Retirement Savings at Every Age

Retirement planning remains one of the most critical financial decisions Americans face, yet recent survey data reveals significant gaps in how much people are actually saving. With over two-thirds of working-age families participating in retirement plans, questions arise about whether these savings are optimized—particularly through strategies like 401(k) after-tax contributions that can amplify long-term wealth building.

The Reality: Current 401(k) Balances Across America

A comprehensive survey of 1,000 working Americans conducted in late 2024 provides a sobering snapshot of retirement readiness. Among those actively saving in 401(k) plans, the largest group (28%) report balances between $50,001 and $100,000. However, age demographics reveal troubling patterns.

Younger workers aged 21-34 show the most promising trajectory, with 65% maintaining balances between $25,000 and $100,000. Conversely, Americans at retirement age (65+) present a cautionary tale: 58% have accumulated $100,000 or less, with 36% holding only $50,000 or less. Only 8% of retirees possess $500,001 or more in their 401(k) plans.

The data shows surprisingly minimal variation by age—a phenomenon experts find concerning. Gen X (ages 45-54) and older millennials (ages 35-43) maintain similar balance distributions despite the latter having substantially more accumulation time ahead. This suggests many Americans may be underutilizing contribution opportunities, including advanced strategies such as after-tax contribution options.

After-Tax Contributions: An Often-Overlooked Strategy

One critical tool many savers overlook is the 401(k) after-tax contribution strategy. Unlike traditional pre-tax or Roth contributions, after-tax contributions allow high earners who have maxed standard limits to continue building retirement wealth. For 2024, workers can contribute up to $23,500 pre-tax or Roth contributions, but after-tax contributions can push cumulative savings significantly higher.

This strategy proves particularly valuable for those in higher tax brackets or nearing retirement who wish to accelerate wealth accumulation. By converting after-tax contributions through a “backdoor Roth” mechanism, savvy investors can effectively increase their retirement nest egg while managing tax implications.

Age-Based Retirement Savings: Where Americans Stand

Breaking down current holdings by generation reveals distinct patterns:

Gen Z and Younger Millennials (21-34): 65% maintain $25,000-$100,000; 22% believe they’ll exceed $1 million by retirement, showing optimism that may be justified with disciplined saving.

Older Millennials (35-43): Balances spread evenly across ranges; 10% lack a 401(k) entirely. Approximately 51% believe they’ll retire with $50,001 to $1 million.

Gen X (45-54): Mirror millennial patterns with 28% holding $50,001-$100,000. Only 15% project exceeding $1 million at retirement.

Pre-Retirement Ages (55-64): Most critical juncture; 28% still maintain $50,001-$100,000 balances. Only 9% expect $1 million+ by retirement.

Retirees (65+): 36% have $50,000 or less; 19% lack a 401(k) entirely, potentially relying on pensions or other retirement accounts.

The Confidence Gap: What Americans Believe vs. Reality

Survey findings reveal a troubling disconnect between expectations and current conditions. While 22% of Gen Z believes they’ll achieve $1 million+ retirements, 38% of all Americans consider this target “impossible.” Remarkably, less than 2% currently report holding over $1 million in 401(k) plans.

Pessimism intensifies with age: 42% of Gen X believe million-dollar retirements are impossible, while 47% of those aged 55-64—closest to actual retirement—hold this view. Meanwhile, the majority (51%) believes typical middle-class Americans have less than $150,000 in retirement savings by age 65.

Expert Guidelines: Building Toward Your Retirement Target

Financial professionals provide concrete benchmarks for 401(k) contribution strategies:

Steve Sexton, CEO of Sexton Advisory Group, recommends:

• Age 30s: Retirement savings equal to one year’s salary
• Age 40s: Three times annual salary
• Age 50s: Six times annual salary
• Age 60s: Eight times annual salary

Matthew Cleary, CFP at Sentinel Group, advocates a higher target: at least 10 times pre-retirement income by retirement age. He emphasizes planning to live on 80% of pre-retirement income, achievable through disciplined saving and appropriate investment allocation.

For those maximizing after-tax contribution options, Cleary notes the dramatic impact of timing. A 22-year-old retiring at 67 with 8% annual returns needs to save $2,600 annually; someone starting at 32 requires $5,800 annually to reach $1 million. Starting early dramatically compounds advantages through time and returns.

Practical Path Forward: Making 401(k) Strategy Work

Despite grim statistics, retirement security remains achievable. Cleary emphasizes three critical elements: save early, save often, and maintain disciplined investment allocation. Those within 10 years of retirement should consult financial planners to ensure savings trajectories align with goals.

For higher earners, exploring after-tax contribution options alongside traditional and Roth mechanisms provides tax-efficient wealth acceleration. Understanding your specific contribution capacity and tax situation—areas where professional guidance proves invaluable—transforms 401(k) plans from passive retirement vehicles into strategic wealth-building tools.

The survey methodology involved 1,000 working Americans ages 21 and older surveyed between mid-to-late 2024, conducted via PureSpectrum’s research platform. Respondents answered 14 detailed questions about current balances, expected contributions, retirement expectations, and financial planning behaviors.