Don McDonald Explains Why Higher Earners Should Skip Roth 401(k) Matches Before Retirement

On a recent episode of the Talking Real Money podcast titled “You’re Right, Of Course.”, co-host Don McDonald addressed a listener correction about SECURE 2.0. James from Fort Lauderdale had pointed out that since SECURE 2.0 of 2022, employers can route the company match into a Roth 401(k), with the employee paying the tax in the year the match is made. McDonald confirmed the rule, then made clear he would skip it.

“While I am still working, I’m probably making more money on a taxable basis than I will be in retirement. Probably. This is a great big broad brush I’m painting with.”

The stakes are real. If you take the Roth match in your peak earning years, you pay tax on every dollar of employer money at your current marginal rate. Get the bracket call wrong and you have voluntarily handed the IRS a check you did not have to write.

The verdict: McDonald is right for most higher earners

The math is straightforward. A traditional match goes in pre-tax and grows tax-deferred. A Roth match counts as taxable income the year it lands in your account. The only question that matters is whether your marginal rate today is higher or lower than the rate you will pay when you withdraw.

Consider a married couple filing jointly with $300,000 in taxable income. Under the 2026 brackets, their next dollar is taxed at 24% on income over $211,400, and any income above $403,550 hits the 32% bracket. Say their employer matches $10,000 a year. Choosing the Roth match means roughly $2,400 in federal tax owed now on money they never see in their paycheck.

Now picture the same couple at 70, drawing $120,000 a year from retirement accounts and Social Security. With the 2026 standard deduction of $32,200 for married couples filing jointly, most of that income sits in the 12% and 22% brackets. The traditional match taken during working years gets pulled out at a blended rate well under what they would have paid up front. Every dollar of bracket arbitrage is money kept.

IRMAA is the trap people forget

Co-host Tom Cock raised the right secondary concern: IRMAA, the income-related monthly adjustment that raises Medicare Part B and Part D premiums once modified adjusted gross income crosses set thresholds. Taking the Roth match while working pushes current AGI up and can trigger surcharges if you are close to a threshold in the lookback year Medicare uses. Once retired and drawing from a traditional 401(k), large required minimum distributions can also push you into IRMAA territory, which is the counterargument for some Roth balance. IRMAA cuts both ways, and the only way to know which side you sit on is to project your retirement income.

The variable that flips the answer

The one number that decides this is the gap between your current marginal bracket and your expected retirement bracket. A household in the 32% or 35% bracket today that expects to retire in the 22% bracket should take the pre-tax match every time. A young engineer in the 12% bracket who expects raises into the 24% bracket within a decade should take the Roth match if offered. The rule is: pay tax in your lowest-rate year.

McDonald’s second point deserves equal weight. “We’re always guessing when it comes to the future. Always. We’re trying to make educated guesses, but they’re not that educated.” Tom backed him up with history: “I bet people in the ’60s said, ‘Oh, taxes aren’t going to go any lower in the future. They’re only going to go up.’ Well, they went down.” Holding balances in both pre-tax and Roth buckets gives you a lever to pull against whatever the tax code looks like in 2045.

One practical note: the Roth match option is legal, but plan adoption has been slow. James himself noted his employer still does not offer it. Check your plan documents before assuming the choice is on the table.

What to do this week

1. Find your current marginal federal bracket using your projected 2026 taxable income against the IRS schedule. If you are at 24% or above, the default answer is the traditional pre-tax match.
2. Estimate retirement income from Social Security, pensions, and a 4% draw on current balances. Compare that figure to today’s bracket. The wider the gap downward, the stronger the case for pre-tax.
3. If your retirement projection lands within one bracket of your working rate, split contributions across both buckets to hedge future tax law. The 10-year Treasury near 4.5% is a reasonable discount rate when modeling the deferred-tax value.
4. Check whether your plan actually offers the Roth match. Many still do not.

McDonald’s advice holds: in your highest-earning years, do not voluntarily prepay taxes you can defer at a lower rate later.