Beyond the 401(k): The Retirement Savings Ladder for High-Income Households

Maxing out the 401(k) feels like the finish line. For a high earner, it's the first rung of a ladder most people never climb.

Ask a high earner about retirement savings and the answer is usually the same: "I max out my 401(k)." It's a good answer. For most households earning $250,000 or more, it's also an incomplete one. The 401(k) limit was designed for the typical worker, and at higher incomes it shelters a shrinking share of what you could be saving. Above it sits a series of accounts, each with its own limit and its own tax treatment. Which of them are open to you depends on your employer, your income and whether you earn anything outside your paycheck.

2026 limits at a glance

• 401(k) / 403(b) / 457(b) employee deferral: $24,500, plus $8,000 at 50 or older, or $11,250 at ages 60 through 63

• Total 401(k) contributions from all sources: $72,000

• IRA (traditional or Roth): $7,500, or $8,600 at 50 or older

• Health savings account: $4,400 self-only, $8,750 family, plus $1,000 at 55 or older

• Roth IRA direct contributions phase out: $242,000 to $252,000 joint, $153,000 to $168,000 single

The ladder, in the usual order

1. Capture the full employer match. An unclaimed match is an immediate return no investment can replicate. If your plan matches per paycheck, front-loading your deferrals early in the year can leave match dollars behind; check whether your plan makes a "true-up" contribution.

2. Max the 401(k) or 403(b). One new rule applies in 2026: if your FICA wages from that employer were over $150,000 in 2025, your catch-up contributions must go in as Roth. If your plan doesn't offer a Roth option, the catch-up isn't available to you.

3. Add a 457(b) if your employer offers one. Many hospitals, universities and government employers offer a 457(b) with its own separate $24,500 limit, on top of the 401(k) or 403(b). For a household with access, this can double pre-tax savings. One caution: in a plan sponsored by a non-governmental employer, the assets remain subject to the employer's creditors, which affects how much to keep there and how to take distributions.

4. Fund a health savings account, if you're eligible. Federally, an HSA is deductible going in and tax-free coming out for medical costs. California doesn't recognize HSAs, so contributions and earnings are taxable on your state return. It's usually still worth doing; it's just less of a bargain here than elsewhere.

5. Make a backdoor Roth contribution, for each spouse. Above the Roth income limits, you can contribute to a non-deductible traditional IRA and convert it to Roth. The pro-rata rule is the trap: if you have pre-tax money in any traditional, SEP or SIMPLE IRA, part of the conversion is taxable. Those balances usually need to be rolled into an employer plan first.

6. Use the mega backdoor Roth, if your plan allows it. Some 401(k) plans accept after-tax contributions beyond the $24,500 limit, up to a combined $72,000 of employee, employer and after-tax contributions, and allow them to be converted to Roth inside the plan. For households whose plans offer it, this is often the largest single source of Roth savings available.

7. Open a plan for any self-employment income. Consulting, speaking, board fees, a side business: any of these can support a solo 401(k) or SEP. Your $24,500 employee deferral is shared across all plans, but employer contributions in the side plan have their own separate limit. At higher levels of self-employment income, a cash balance plan can shelter considerably more.

Pre-tax or Roth?

Each rung forces a choice between a deduction now and tax-free withdrawals later. For most high earners in their peak years, combined federal and California marginal rates favor pre-tax contributions. But not always. The answer depends on your expected rate in retirement, whether you plan to stay in California, the size of your existing pre-tax balances and, since 2026, whether a pre-tax contribution keeps you under the $505,000 SALT phase-down line. A household with large pre-tax balances may already face high taxable withdrawals later, which argues for adding Roth now.

Skipping a rung, such as a 457(b) left unused or an IRA balance that blocks the backdoor Roth, is one of the quietest ways a high earner overpays. Nothing on the return flags it.

The engineer and the chess player

Each rung has precise rules: limits, deadlines, income tests and the pro-rata calculation. That's the engineer's work. The chess player's question is how the rungs interact with everything else over time. A Roth conversion in a sabbatical year, a pre-tax contribution that keeps income under a threshold, an IRA rolled into a 401(k) one year so a backdoor Roth works cleanly the next: each is a move whose value depends on the moves around it. The cost of getting the order wrong shows up decades later, in the size of the tax-free balance that was never built.

Why order matters

The sequence above isn't fixed, but the logic is. Free money first, then the accounts with the best tax treatment, then the ones with more conditions. The order also shifts with circumstances: a year with a large bonus favors pre-tax rungs, while a lower-income year can favor Roth conversions instead.

What to take from this

Most high-income households are using one or two of these rungs. The others are often available, quietly, every year. Finding them takes one review of what your employer offers, what you already hold and what the next several years look like, done inside a multi-year plan, because each choice also affects your bracket, your SALT deduction and the taxes you'll owe in retirement.

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Discuss your situation with Natalie C. Papagni, CPA

If your retirement plan is "I max out my 401(k)," one conversation will show which other rungs are open to you this year, and in what order to use them. A complimentary 30-minute consultation is the first step.

Natalie C. Papagni, CPA — Tax, Planning & Advisory Services 4275 Executive Square, Suite 200, La Jolla, CA 92037 (858) 754-8277 | service@lajollataxcpa.com | lajollataxcpa.com

Disclaimer: This material is provided for general educational purposes only. It is not tax, legal or accounting advice, and it does not create a CPA–client relationship. Tax outcomes depend on individual facts and circumstances, and figures and rules change from year to year. Consult a qualified professional about your specific situation before acting. Figures reflect 2026 federal limits.