1. Use Dicktator (another genitalia add-on probably works too, but I haven't tried it).
2. Pose the penis until the entire shaft evenly clips at least 50% into the character's body.
3. Put on a piece of clothing that has a high polygon count.
4. Set both the clothing's smoothing and collision iterations to around 9.
5. Once the clothing is relatively smooth around the bulge, turn off visibility of the penis and its shell.
6. Voila.
Note: If you change the pose of the model, you will again have to adjust the position of the penis underneath the clothing. I'm sure there's a way to save the bulge into an actual clothing morph, but I haven't bothered to look.
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on how to do this, but in my opinion it's unnecessarily complicated when it comes to male genitals. It just adds a Dforce Wind node to add pressure to the clothing so that it wraps a bit more tightly to the genitals. In theory, adding Dforce pressure would show more detail since it forces clothing to wrap around the shaft, head and veins more tightly.