Maximize Contributions to Retirement Accounts

Optimizing your retirement balance sheet requires a systematic approach to funding both pre-tax and post-tax retirement buckets. High-income households should approach their savings cascade by prioritizing accounts that shield the maximum amount of capital from the annual tax drag.

If you are in the top marginal tax bracket, use this structural savings sequence to maximize your annual deferrals:

1.

Elective Deferral—Pre-Tax First: Contribute $24,500 (or $32,500 if age 50 or older in 2026) as an employee elective deferral. The dollar cap is identical whether you route it pre-tax or Roth, so the only real decision is which bracket pays the tax. In the top bracket today—roughly 47% combined in California—default to the pre-tax 401(k): you deduct at 47% now, withdraw later at your lower, blended retirement rate, and invest the up-front tax savings rather than spending them. As the side-car analysis in section “Tax-Advantaged Accounts: Choosing Between Pre-Tax and Post-Tax Options” shows, for the realistic high-earner case—a retirement bracket 60–90% of your current one over a 20–40 year horizon—pre-tax with the savings invested beats Roth, and a high earner’s future rate is almost always lower than their peak earning-years rate. Elect the Roth 401(k) for this deferral only if you genuinely expect a higher marginal rate in retirement, or you are early-career in a low bracket. Roth 401(k) deferrals carry no income limits (unlike a Roth IRA), so the door is always open to a high earner—the question is whether walking through it is worth paying tax at your peak rate. (Note the 2026 wrinkle: catch-up dollars are forced into Roth above $150,000 of prior-year wages—section “Regulations Governing Contribution Limits to Qualified Retirement Plans”.)

2.

Employer Match: Capture every available matching dollar—it is an instant, guaranteed return that outranks the pre-versus-Roth debate entirely. The match defaults to pre-tax unless your employer has adopted the SECURE 2.0 Roth-match provision; electing a Roth match makes the matched dollars taxable ordinary income to you this year, which for a top-bracket earner usually argues for leaving the match pre-tax, consistent with the deferral logic above.

3.

Mega Backdoor Roth: Contribute up to $35,250 to your employer’s after-tax 401(k) sub-account, and execute an immediate in-plan Roth conversion. This contribution is calculated by subtracting your elective deferral ($24,500) and an assumed employer match ($12,250) from the Section 415(c) plan limit ($72,000 in 2026). Fully funding this after-tax sleeve requires $66,509 in pre-tax earnings at a 47% tax rate.

4.

Backdoor Roth IRA: Contribute $7,500 (or $8,600 if age 50 or older) to a traditional non-deductible IRA, immediately converting it to a personal Roth IRA.

5.

Spousal IRA: If your spouse is a non-working spouse, contribute an additional $7,500 to a spousal backdoor Roth IRA using your earned income.

Refer to IRS Pub. 560, “Retirement Plans for Small Business” for self-employed plan limits, and IRS Notice 2014-54 for rules governing after-tax 401(k) distributions and conversions.