Roth 401(k) vs Traditional 401(k): Which Should High Earners Actually Choose?

For high earners, the weakest part of the pre-tax case is the assumption underneath it: that your bracket drops in retirement. A large all-pre-tax balance is often the reason it does not, because Required Minimum Distributions arrive as ordinary income on the government's schedule rather than yours.

The Bracket-Arbitrage Math Most Advisors Understate

The decision is a bet on your future marginal rate against your current one. In the 32% or 35% bracket today, the traditional contribution saves real money now.

But a high earner retiring with a $3 million traditional 401(k), Social Security, and a brokerage account faces RMDs starting at age 73. Those RMDs are fully ordinary income, and they push a meaningful portion of Social Security into taxable territory too. It is not unusual for a couple to land back in the 22% or 24% bracket, sometimes higher, with no salary.

The 2026 federal brackets show the 24% bracket running up to roughly $206,700 for single filers and $413,400 for married filing jointly. If your RMDs alone push you into that range, the lower-bracket-later assumption evaporates.

The Hidden Cost of an All-Pre-Tax Balance

Two problems compound. First, RMDs grow with the account: a $3 million balance at 72 produces a very different first RMD than $1.5 million does. Each dollar added pre-tax today gets forced out later on someone else's timetable.

Second, RMD income feeds directly into Medicare's IRMAA surcharges. In 2026, single filers with modified adjusted gross income above $106,000 (and married filers above $212,000) begin paying premium surcharges on Medicare Parts B and D. A large RMD can trigger thousands of dollars in additional annual premiums.

Money spread across pre-tax, Roth, and taxable accounts, the Soil layer of your plan, gives you control over taxable income in retirement rather than letting an RMD schedule set it.

When a Mix Is Actually Right

Roth is not automatically the answer. If you are having an outlier income year and expect your rate to compress in three to five years, the traditional contribution earns its keep.

For most HENRYs in stable high-income careers, the answer is a blend: enough traditional to shave income out of the top brackets, and enough Roth to build a pool RMDs cannot touch and IRMAA cannot count. The 2026 employee contribution limit is $23,500, with a $7,500 catch-up for those 50 and older, split in any proportion your plan allows.

The Takeaway

The fact that changes the answer is whether low-income years lie ahead. Gap years between your last paycheck and age 73 are the cheapest window you will get to move money into Roth, and they only exist if you plan for them.

The version that stings is the saver who did everything right: maxed the 401(k) for 25 years, invested well, never touched it, and arrives at 73 in a higher bracket than they had while working, with IRMAA surcharges on top. Good behavior built the problem.

If you have never seen your projected RMDs at 73 next to your current election, that projection is worth a conversation before you set next year's deferral.

The information provided is for educational purposes only and does not constitute investment, legal, or tax advice. Consult with qualified professionals for guidance specific to your situation.