You probably already know the basics of a 401k: how match works, how Traditional vs Roth compares, etc.
But in this newsletter I wanted to share some lesser known facts/strategies/tips around 401ks.
1. The Department of Labor’s Retirement Savings Lost and Found
Some people work part time jobs in college and totally don’t realize that they may have gotten enrolled into a 401k automatically by the plan. And some people, may just lose track of it. Or maybe you want to help your parent search for one…
Apparently, Americans have forgotten about $2.1 TRILLION in retirement savings. I was shocked when I read that… Luckily, there is a lost and found service by the DOL for retirement plans! It’s a government site, so not some paid scam. Good to know if that happens to you/your loved ones.
2. Net Unrealized Appreciation (NUA) on company stock
Did you know that some employers allow you to buy company stock (either through a purchase plan or matching program) inside your 401(k)? If you have that, the Net Unrealized Appreciation (NUA) rules can potentially help you reduce your tax bill.
Under NUA rules, you may be able to take that stock out of the 401k plan as part of the lump sum distribution. You will pay ordinary income tax on the stock’s cost basis, while the unrealized appreciation can receive long term capital gains treatment.
3. Solo 401k employer + employee stacking
Did you know that you may be able to open a Solo 401k for your small business? Say you have a small business that you are making $30k/yr. You can actually open a 401k and potentially lower your tax bill.
You can contribute as an employee and as an employer (subject to self-employment income limits and other plan contributions). One limitation, though, is if you already contribute to a 401(k) through your W-2 job, your employee limit ($24,500 in 2026) applies across your plans. So if you max that out, you can only now contribute as the employer.
4. Front loading
If you have the means, and your employer allows it, and you aren’t sacrificing the match, it’s worth looking into front loading your 401k contributions.
Contributing more early in the year can get more money invested sooner. Just make sure you don’t accidentally miss out on matching contributions later in the year (unless your plan has a true up provision or protects your full match).
5. Mega Backdoor Roth
After you hit the regular employee deferral limit ($24,500 in 2026), some 401(k) plans let you make additional after tax contributions. It’s basically like contributing to a Roth account.
The total limit of employee + employer match + after tax is $72,000. Say you contribute $24,500, employer gives you $10,000, then you could have $37,500 of remaining after-tax contribution if allowed by the plan. You can then convert those after-tax dollars to a Roth 401(k) or roll them into a Roth IRA, depending on what your plan permits. This is a great strategy for high earners to get more money into retirement accounts, instead of using a brokerage.
6. Roth conversion ladder for early retirement
Roth conversion ladder can help you retire early and access retirement money before 59 ½
The idea is simple – you convert traditional 401(k) or IRA money into Roth over several years, during a period when your income is low (or you are using capital gains to live off). Each conversion has a 5 year period for purposes of 10% early penalty. After this 5 year period, the converted amount can be withdrawn without the 10% penalty.
This strategy requires planning because the conversion itself creates taxable income. Also, if you are still employed, there are rules around partial withdrawals (they may not be allowed), so you may be able to only do this after leaving your job.
I hope you learned something new today!
Chat soon!
MC, CPA