Some of these plans also allow after-tax contributions. Under the terms of many of these plans, you may have significant, or even total, responsibility for investing your contributions. The importance of electing the maximum contribution amount to these savings plans cannot be overstated. To the extent your employer matches any portion of your contribution, it becomes even more important to contribute. Receiving an employer match is the same as receiving an annual increase in pay.
Some plans permit additional contributions from after-tax compensation.
Both the money contributed and the plan's earnings are accumulated tax-free until they are withdrawn. Post-tax contributions are nontaxable when withdrawn. These distributions are often subject to a 10-percent early withdrawal penalty, in addition to the regular income taxes. Individual Retirement Accounts. Withdrawals before age 59 are generally subject to a 10-percent early withdrawal penalty, in addition to the regular income tax payable on the distribution.