I make $135k a year and my company is offering a 401k or a Roth 401k – which one should I pick?

In a Reddit post on the r/personalfinance forum, an important question surfaced. The poster earns $135,000 annually at a job that offers both a traditional 401(k) and a Roth 401(k). Their company matches contributions, but those matching funds do not vest for five years and are forfeited if the employee leaves before then. The poster expects to leave before the vesting window closes, which raises an obvious question: why contribute at all?

The poster asked whether to invest in either workplace plan or to open a Roth IRA instead. A financial advisor who understands the full picture of someone’s personal finances and long-term goals is always the best resource for that kind of decision. That said, some general guidance can help frame the choice before walking into that conversation.

Roth 401(k) or traditional 401(k): how each one works

The choice between a traditional and a Roth 401(k) is fundamentally a tax-timing question. Each account is structured as a mirror image of the other:

• A traditional 401(k) accepts pre-tax contributions, so money goes in before income tax is applied. Taxes are deferred until withdrawal, at which point distributions are taxed as ordinary income. The IRS also requires account holders to begin taking Required Minimum Distributions at age 73.
• A Roth 401(k) is funded with after-tax dollars, which means no upfront tax break. The payoff comes at retirement: qualified withdrawals are entirely tax-free. Roth 401(k) accounts are exempt from Required Minimum Distribution rules, and those distributions do not count toward the income thresholds that can make Social Security benefits taxable.

The core trade-off is timing: pay taxes now, or pay taxes later. A saver whose retirement tax rate is likely to be higher than today’s rate benefits from locking in the current rate through a Roth 401(k). A saver who expects to drop into a lower bracket in retirement gets more mileage from deferring taxes through the traditional option.

The math on $135,000

A single filer earning $135,000 sits squarely in the 24% federal marginal tax bracket for 2026. After subtracting the $16,100 standard deduction, taxable income lands at roughly $118,900, well inside the 24% band that spans from $105,700 to $201,775 for single filers in 2026, per IRS Revenue Procedure 2025-32. The One Big Beautiful Bill Act, signed in July 2025, permanently extended and built upon the higher TCJA-era deduction levels that underpin this figure.

• Choosing a Traditional 401(k) and maximizing the $24,500 elective deferral cuts taxable income by that full amount, saving up to $5,880 in federal taxes at the 24% marginal rate. That freed-up cash can be redirected into a taxable brokerage account or put to work elsewhere.
• Choosing the Roth 401(k) is a calculated bet that the effective tax rate in retirement will exceed 24%. That scenario is unusual unless the account holder anticipates substantial taxable income streams in later years, such as rental revenue from real estate or distributions from a traditional pension.

Thinking carefully about when taxes are cheapest helps a saver choose the account that minimizes the total bill paid over a lifetime.

The advanced play: Mega Backdoor Roth and the 2026 Roth mandate

The new Roth catch-up mandate

A significant SECURE 2.0 Act provision took effect on January 1, 2026. Any worker whose FICA wages exceeded $150,000 in the prior calendar year must now make all age-50-or-older catch-up contributions on a Roth (after-tax) basis. Workers at employers that do not yet offer a Roth 401(k) option will be unable to make any workplace catch-up contributions at all until the plan is updated. At $135,000 today, this requirement does not apply, but it is worth monitoring as income climbs toward that threshold.

The Mega Backdoor Roth

Before walking away from a workplace plan in favor of an outside account, it is worth reviewing the plan’s Summary Plan Description to see whether the employer allows after-tax contributions (separate from standard Roth deferrals) and in-service distributions. When both features are available, the Mega Backdoor Roth strategy lets high earners contribute well beyond the standard deferral ceiling. For 2026, the total annual addition limit for a 401(k), combining employee and employer contributions, is $72,000. Converting after-tax contributions up to that ceiling into tax-free Roth growth remains one of the most underused wealth-building tools available through corporate retirement plans.

2026 contribution limits at a glance

• Standard 401(k) deferral: $24,500 (up $1,000 from 2025)
• IRA contribution limit: $7,500 (up $500 from 2025); age 50+ can add a $1,100 catch-up, bringing the total to $8,600
• Age 50+ catch-up (401(k)): $8,000
• Age 60 to 63 “super catch-up” (401(k)): $11,250

Workplace plan or an independent account?

The Reddit poster was skeptical of contributing to a workplace plan precisely because the matching funds would not vest before they expected to leave the job. That skepticism pushed them toward opening a personal Roth IRA instead.

An independent account carries real advantages. The saver controls the brokerage, sidesteps the paperwork of rolling over an account after a job change, and gains access to a far wider investment menu than a typical 401(k) plan offers. There is also a key income point worth highlighting: at $135,000, this poster falls below the 2026 Roth IRA phase-out range for singles, which begins at $153,000 and closes at $168,000. A direct Roth IRA contribution is fully available without any backdoor strategy.

Even so, walking away from an employer match is almost never the right call. A match is free money, and the standard rule of thumb is to contribute at least enough to capture it before directing savings elsewhere. The poster expects to leave before vesting, but plans shift. Staying longer than anticipated and forfeiting the match by choice would be an expensive oversight.

The downside of contributing enough to earn the match is small. In the worst case, the employee leaves early, rolls their own contributions into a Roth IRA, and leaves the unvested matching funds behind. In the best case, they stay, vest, and the employer’s dollars add meaningfully to their retirement balance. Contributing the minimum needed to capture the full match is a sound baseline in almost every scenario.

Ultimately, the right answer depends on individual goals and circumstances. For most people in this situation, participating in the workplace plan and selecting whichever option provides the greatest long-term tax advantage is a reasonable starting point on the path toward financial security. A financial advisor can help work through the specifics.

Editor’s note: This article was updated to reflect confirmed 2026 IRS figures under Revenue Procedure 2025-32, including the $16,100 standard deduction for single filers and the 24% tax bracket running from $105,700 to $201,775. The total 401(k) annual addition limit of $72,000 (employer plus employee) was added as context for the Mega Backdoor Roth discussion, and the 2026 Roth IRA catch-up contribution detail ($1,100 additional, $8,600 total for age 50 and older) was incorporated into the contribution limits summary.

Contact [email protected] for any questions or corrections.