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

In a Reddit post, an important question came up. The Reddit user said they make $135,000 annually and work at a job that offers both a traditional 401(k) and a Roth 401(k). Their company matches contributions, but those matching funds don’t vest for five years and they lose them if they leave before then — which they most likely will.

Their question was whether to invest in either of their workplace plans or opt for a Roth IRA instead. While the best person to offer advice on this would be a financial advisor that knows the ins-and-outs of their financial life and future goals, some general advice can also be helpful in making this choice.

Roth 401(k) or traditional 401(k)

If you have a choice of workplace plans and you’re deciding between a traditional and a Roth 401(k), it’s important to know how each one works:

• A traditional 401(k) allows contributions with pre-tax dollars so you aren’t taxed on money going in — but you do pay taxes when money comes out. You’re taxed on withdrawals in retirement at your ordinary income tax rate and you must begin taking money out at age 73 as you’re subject to Required Minimum Distribution rules.
• A Roth 401(k) does not offer upfront tax savings and you invest with after-tax dollars. You get to make tax-free withdrawals, though. You also do not have to take RMDs and any money you take out of your Roth 401(k) will not count in determining if you hit the income threshold at which Social Security benefits become taxable.

So, how should you decide which to use? Consider your tax bracket now and likely tax bracket later. If you expect to be taxed at a higher rate in retirement — because you think your income will be higher or tax rates will increase in general — then you’d want a Roth 401(k). If you think you’re paying higher taxes now, you want the tax savings now so should choose the traditional 401(k).

Let’s Do the Math on $135,000

At $135,000, a single filer sits firmly in the 24% federal marginal tax bracket.

• If you choose a Traditional 401(k) and maximize your elective deferrals, you instantly shave thousands off your current tax liability. That saved cash can be redirected into a brokerage account or a backdoor Roth IRA.
• If you choose the Roth 401(k), you are making an explicit bet that your effective tax rate in retirement will be higher than 24%—a rare scenario unless you plan on having massive taxable income streams (like real estate syndications or traditional pensions) later in life.

By considering when the tax breaks are likely to save you the most, you can choose the account that minimizes the money you’ll send to the IRS over your lifetime.

The Advanced Play: Mega Backdoor & The 2026 Roth Mandate

The New 2026 Roth Catch-Up Mandate

If you are climbing the salary ladder toward or past the $150,000 threshold, a major SECURE 2.0 rule goes into effect this year. Starting in 2026, any worker who earned more than $150,000 in FICA wages in the prior calendar year is strictly required to make their age-50+ catch-up contributions on a Roth (after-tax) basis. If your current company doesn’t offer a Roth 401(k) option yet and you cross that income line, you won’t be allowed to make workplace catch-up contributions at all until they update their infrastructure. Keep this rule in mind as your income moves north of your current $135k baseline.

The “Mega Backdoor Roth” Secret

Before abandoning your workplace plan for an outside Roth IRA, dig into your company’s 401(k) summary plan description to check if they allow after-tax contributions (distinct from standard Roth contributions) and in-service distributions. If they do, you can leverage the Mega Backdoor Roth strategy. This allows high earners to blow past the standard employee deferral limits and save massive additional amounts of money that convert instantly into tax-free Roth growth. It is one of the most underutilized wealth-building tools available in modern corporate plans.

2026 Account Limits Checklist

• Standard 401(k) Deferral: $24,500
• Standard IRA Contribution: $7,500
• Age 50+ Catch-up (401(k)): $8,000
• Age 60–63 “Super Catch-up” (401(k)): $11,250

Workplace or independent plan?

There are undoubtedly benefits to just picking your own plan. You can choose a brokerage firm that you’re interested in, won’t have to worry about moving the money if you leave your job, and can gain access to a broader pool of investment options than a 401(k) makes available.

However, passing up an employer match isn’t a good idea because it is free money. The general rule of thumb is to invest at least enough to get your match before switching to other accounts. While the Redditor doesn’t think they’ll be at the company long enough to earn it, life may turn out differently and they may decide to stick around — which could lead to big regrets if they passed up free 401(k) funds for no reason.

The downsides of investing enough to earn the match are not big enough disadvantages to give up the chance at this free money. It’s likely worth contributing the necessary sum to earn the full 4%. The worst that happens in this case is they roll their contributions over into a Roth IRA, leaving the unvested matching funds behind if they leave their job early. But, in a best-case scenario, they end up getting this money and it makes them richer.

Ultimately, the right choice will depend on their goals and a financial advisor can help define those — but, investing in the workplace plan and picking the one offering the biggest tax breaks is a good, simple solution that should help set them on the path to future financial security.

Editor’s Note: This article was updated to include 2026 account contribution limits, a tax-impact comparison table for a $135,000 income, an overview of the SECURE 2.0 Roth catch-up mandate for high earners, and details on utilizing the Mega Backdoor Roth strategy.