Pre-Tax or Roth: The 401(k) Question High Earners Get Backwards

The loudest advice in personal finance says put everything in Roth, because taxes are only going up. It is confident, it is everywhere, and for a lot of high earners it is backwards. Monday’s Retirement Brief covered when not to do a Roth conversion. This is the same idea for the years when the paycheck is big: when the pre-tax box beats the Roth box, and the honest exceptions where it does not.

THE ONLY QUESTION IN THE DECISION

Pre-tax or Roth comes down to one comparison: your tax rate now versus your tax rate later. A pre-tax dollar skips tax at today’s rate and pays whatever rate future you faces. A Roth dollar pays today’s rate and skips the future one. That is the entire decision. Not a philosophy, not a prediction about Congress. A rate comparison between two versions of you.

WHY PRE-TAX USUALLY WINS AT HIGH INCOME

At $400,000 of household income, your next dollar is being taxed at 32 or 35 percent federal, plus Ohio’s 2.75. Every dollar you put in the Roth box volunteers to pay that rate today. Every dollar in the pre-tax box skips it, and gets its tax bill decided later, in years you have far more control over than you think: the stretch after the paycheck stops and before Social Security starts, when the brackets sit wide open and conversions happen at 22 or 24. Deferring at 35 and settling later at 24 is the same arbitrage a Roth conversion chases, just run in the correct direction. Roth contributions at your peak burn that spread on purpose.

"BUT TAXES ARE ONLY GOING UP"

Maybe. How much is the question. That sentence is a slogan until it has a number attached, so put one on it: if the 24 percent bracket someday becomes 25, should you volunteer to pay 35 today to avoid it? I would say not. When a client brings me this argument, I do not debate it. I open the tax software and we look at their brackets on the screen, this year and the retirement years, side by side. The picture usually ends the conversation, in whichever direction the numbers point. Run the numbers, not the slogan.

THE HONEST EXCEPTIONS

Sometimes Roth is right at high income, and pretending otherwise would be its own slogan. Since this year, if you are 50 or older and made more than $145,000 in wages last year, the law decides for you: your catch-up contributions must go in as Roth. No decision to make. The young high earner with a steep career is a real case too: if the lifestyle is funded, you are doing all of the things you want to do, and the income is only climbing, paying today’s rate can be worth it, because today may be the cheapest rate you ever see. Notice the order, though. The Roth conversation comes after the lifestyle funding, not before it. Expected family money can tilt the math the same direction, since an inheritance can push your later brackets up. And if a job loss ever hands you a low-income year, that is the year to convert pre-tax dollars aggressively, which only works if you built the pre-tax pile in the first place.

A SIMPLE EXAMPLE

Marcus is 39, in Powell, household income around $430,000, and for three years he has been filling the Roth 401(k) box because a podcast told him taxes are going up. We look at the screen together. His contributions are being taxed at 35 percent federal plus 2.75 state on the way in. His plan has him retiring at 56, with nearly a decade of low-income years before Social Security, exactly the years conversions run at 24 or less. Switching to pre-tax saves him roughly 11 cents of tax on every contributed dollar, kept invested and growing until he settles up at the lower rate on his own schedule. Across two decades of maxed contributions, the same dollars, that spread adds up to more than $50,000 before growth does its part. Marcus did not need a prediction about Congress. He needed to meet the future version of himself, the one in the 24 percent bracket, waiting to take the handoff.

THE WHOLE IDEA

The pre-tax versus Roth decision is a rate comparison between you now and you later, and at peak earnings the comparison usually favors deferring, so the low years ahead can do the cheap work. The exceptions are real and worth checking. But check them with numbers on a screen, not slogans from a podcast. Knowing which version of you should pay the tax is the kind of thing worth having someone map out.

CLOSER TO RETIREMENT? FILE THIS AWAY

Two notes for the final working years. First, the new rule has already made part of this decision for you: 50 or older with wages over $145,000 last year means your catch-up contributions are Roth now by law, so put your planning energy into the rest of the contribution instead. Second, your last high-earning years are the single best deferral years you have left. Defer hard at the peak, then flip to conversions the first full year the paycheck stops. Monday’s Retirement Brief walks that conversion timing in detail, including when the right move is to wait.

WORTH A READ

Roth Comparison Chart (IRS.gov)

401(k) Contribution Limits (IRS.gov)

Required Roth Catch-Up Contributions for 2026 (The CPA Journal)

If your 401(k) elections were set by a podcast instead of a projection, reply anytime. Happy to put your brackets on the screen and let the numbers pick the box. No pressure, just a conversation.

Curious what working together looks like? There is more at jcsretirementtaxadvisors.com, and if a conversation sounds easier, you can grab 30 minutes on my calendar whenever it suits you.

Know someone who should be reading this? Forward it along, that is how most people find me. And if this was forwarded to you, one subscription at buckeyeretirementbrief.beehiiv.com gets you both briefs: retirement on Mondays, equity comp on Thursdays.

Jesse Stacy MTAX, CFP®, Enrolled Agent

JCS Retirement Tax Advisors

This newsletter is for education only and is not tax, legal, or investment advice for your situation. Tax figures are for the 2026 tax year and the example is illustrative. Your numbers depend on your full picture.