When you adjust your investments the following will happen:
Initial condition:
- $600 pre-tax divided into whatever options your 401K allows (company stock, small company, bonds, international, fixed...)
- $600 Company match (some companies allow you to specify a different investment split for your company match). This is considered pre-tax. You will pay taxes when you withdraw it.
- Your contribution of $600 pre-tax reduced your apparent income by $600 a month which if you are in the 25% tax bracket could have saved you $150 a month in federal taxes*
Modified condition:
- $500 pre-tax divided into whatever options your 401K allows (company stock, small company, bonds, international, fixed...)
- $100 post-tax divided into whatever options your 401K allows (company stock, small company, bonds, international, fixed...)
- $600 Company match (some companies allow you to specify a different investment split for your company match). This is still all considered pre-tax. You will pay taxes when you withdraw it.
- Your contribution of $500 pre-tax reduced your apparent income by $500 a month which if you are in the 25% tax bracket could have saved you $125 a month in federal taxes*
This means that after this change you will note that the amount of federal tax you pay each month via withholding will go up. You are now contributing less pre-tax, so your taxable income has increased.
If you make no other changes, then in April you will either have increased your refund by 6 months x the additional $25 a month, or decreased the amount you owe by the same amount.
There is no change in the total 401K balance at the end of the year, other than accounting for how much is held pre-tax vs. Roth post-tax.
Keep in mind that employer contributions must be pre-tax. The company could never guess what your tax situation is. They withhold money for taxes based on the form you fill out, but they have no idea of your family's tax situation. If you fail to have enough withheld, you pay the penalty — not the company.
*The tax savings are complex because it depends on marital status, your other pre-tax amounts for medical, and how much income your spouse makes, plus your other income and deductions.