People who have 401k plans may make both pre and after-tax contributions to them, but only in a very narrowly defined way which is fairly complicated.
When you open a 401k account, you can make either pre or after-tax contributions. Pretax contributions will result in a short-term financial gain, because they will lower your yearly income, and therefore put you in a lower tax bracket. The downside to that comes when you retire and start to withdraw money from your 401k, because you have to pay the taxes then. When you decide to make after-tax contributions to your 401k, you're paying everything up front, so that when you withdraw from the account upon your retirement, you're not paying any income tax. If you make both pretax and after-tax contributions to your 401k, you will have different tax issues to reconcile when the time comes for you to access your funds when you retire.
The pros and cons to pre and after-tax contributions, and a combination of the two, are up to the individual to decide. If you make pretax contributions, you're saving money in the short term. If you make after-tax contributions to your 401k, you're lowering your short-term cash flow but can look forward to have a nest egg that doesn't have any strings attached. If you decide to put more money into your 401k after you've dealt with your taxes then so much the better saving more money than you spend is truly a wise and prudent way to live.
If you're wondering whether to make pre or after-tax contributions to your 401k, make sure you sit down a financial adviser or a trusted representative of your company's human resources department and go over all your questions with them. Everyone knows that 401k's can have complicated tax repercussions, so seeking the advice of an expert is a very smart move.
