I am currently maxed out on my 401K pre-tax contributions, meaning I meet the $15K limit the government allows for pre-tax 401K investing.

My company offers me the option of investing an additional 6% of my income into an after-tax 401K fund (using the same mutual funds as offered for the pre-tax investing)

What (if any) are the advantages or disadvantages of investing into an after-tax 401K mutual fund versus taking after-tax pay (out of my checking acount for example) and investing it into... let just say... the same exact mutual fund that I would have invested in with my after-tax 401k contributions?  Is there any difference in terms of penalties?  It seems to me there's no real advantage of investing in an 'after-tax' 401K mutual fund over investing into the same exact mutual fund outside my 401K.  In fact, it seems like I may just be putting myself at risk for undesirable penalties should I ever choose to withdraw any of the after-tax money from my 401K that I wouldn't incur if the same money was held in the same mutual fund outside the 401K.  Am I correct?

anyone?

IMHO, the more money you are able to defer into a non-taxable investment such as an after-tax 401k contribution is a great deal.  It grows tax-deferred, and maximizes your retirement nest-egg.  I'm not up on what penalties might be, if any.  I would assume withdrawal penalties for after-tax contributions are the same as for pre-tax.  

While on the subject, you should also make the maximum contribution to your IRA, whether you're able to deduct it or not.  If you're eligable for a Roth IRA, I would further continue to take advantage of the investment as well.

Best,

Ed

Roth if you qualify, if not, fully deductible Traditional IRA if you qualify, if not.....

take a look at the transaction costs of your after tax 401k options versus the same/similar retail fund.
it's possible your 401k version has lower expenses or no brokerage fee

otherwise, if you dont want any more money in retirement accounts, try tax-managed mutual funds or ETF's in your brokerage account.

j

I would suspect fees if their pushing them.   Your not 1 of their investors.There are INSTUTIONAOL investors whom get a break and do not pass it on to you(maybe your company).Be your own person. Do it yourself IMO FWIW. They may charge extra for their servicesand not pass it on 2U

I'm finding it amazing that I'm unable to get a 100% reliable answer on my original question, but I appreciate everyone's input.  I even asked a close friend who's a Georgetown Law graduate and CPA and even he didn't know the answer off the bat.  He's supposed to be getting back to me, afterwhich I'll post more information.  I guess not that many people really FULLY understand their 401Ks.

OK, here's the low down.

There is absolutely no benefit in using an after-tax retirement fund administered through your company 401K plan.  It is no different than doing it on your own.  Sorry if I wasted anyone's time.

It is different if your after tax offerings in your 401k consists of institutional share classes not available (no loads and high minimums) to the retail public.

Quoted: It is different if your after tax offerings in your 401k consists of institutional share classes not available (no loads and high minimums) to the retail public.

ah, good point...

Here's another point to consider.  I've been reading up on asset protection lately which unfortunately is becoming more and more necessary.  I'm not plannin on being sued, but accidents happen and there are too many out there looking to win the legal lottery.  Anyway, your 401k money is protected from creditors.  Your IRA might be depending on the state.  Your taxable mutual funds are not.

Are you in a high risk profession (doctor, lawyer, etc.).  Do you live in a nice house or drive a nice car which might invite that sort of litagant?  Things to think about.

If not for the asset protection thing, I would probably skip the after-tax 401k.  You're still going to be taxed on the gains/dividends and recordkeeping could be a pain.