I was looking at my 401k and it says that it has a pre - tax contribution limit of 18k and then a total limit of 50k. Why would someone want to contribute to the account post tax? do you then not have to pay tax on the interest of that ? and what kind of account would that technically be ?
Back in the day when it wasn't possible to see your balance everyday or make changes every paycheck it was much more difficult to hit the max contribution exactly. We could only tell them what percent (an integer only) and we could only change it quarterly, and had to submit the paperwork 30 days in advance of the start of the quarter.
The idea was to set it up so that you hit the number with the 26th paycheck of the year. The excess was automatically put into the system post-tax. The alternative was to set the numbers a little short, and miss out on some of the company match. The match was calculated on each check, and you needed to make sure those last checks withheld at least 8% or you would miss out.
Things are much easier now. Also the Roth option fills the need for most post-tax retirement savings.
The higher limit also includes the company contribution.
Because the money you contribute to a 401k will grow tax-free (even if you paid taxes on the contribution money) for many years.
One reason is the higher limit. The amount you can contribute to pre-tax Traditional 401(k) and Roth 401(k) combined cannot exceed $18,000 per year (currently), but that does not include post-tax Traditional 401(k) contributions. Pre- and post-tax Traditional 401(k) and Roth 401(k) contributions as well as employer contributions combined still cannot exceed $54,000 per year (as of 2017), but that's a much higher limit.
The fact that the growth is pre-tax is a disadvantage, but it might not be a big disadvantage if you don't leave it in there for very long, for example: 1) some plans offer in-plan Roth conversions, so you can convert the huge amount you contributed to Roth 401(k), where the growth is post-tax; 2) if you will leave the company soon, then you can rollover the pre-tax and post-tax amounts to Traditional and Roth IRAs, respectively, and the Roth IRA growth is post-tax.