Here’s something I see all the time. A physician or business owner is doing the responsible thing, maxing out their 401(k) every year, and they assume that means the retirement piece is handled. And in a lot of cases, it mostly is. But there are a few mistakes that show up specifically at higher income levels, and they’re easy to miss because on the surface everything looks right.
So I want to walk through the three I see most often. None of these are about picking better investments. They’re about how the account is set up and funded, which is kind of the part nobody looks at once it’s on autopilot.
Mistake #1: Maxing Out Too Early and Losing Part of the Match
This one surprises people, because it punishes you for doing something that feels smart.
Say you earn $400,000 and you set your deferral high so you hit the 2026 limit of $24,500 by June. Feels great, right? You’re done for the year. The problem is that most employers calculate their match paycheck by paycheck. Once your contributions stop, in many plans the match stops too. So for the second half of the year, you’re leaving employer dollars on the table even though you contributed the maximum.
Some plans fix this automatically with what’s called a true-up provision, where the employer looks at the full year and makes up any match you missed. Fidelity and Schwab have both written about this, and the takeaway is the same: you have to check your specific plan document, because plans handle it differently.
This is a high earner’s mistake almost by definition. If you’re not on pace to hit the limit early, it can’t happen to you. If you are, the fix is simple — either confirm your plan has a true-up, or spread your contributions so you’re deferring in every pay period of the year. Ten minutes with your plan document, and the problem goes away.
Mistake #2: Never Checking Whether Your Plan Allows the Mega Backdoor Roth
Most high earners know they make too much to contribute directly to a Roth IRA. What a lot of them don’t know is that their 401(k) might have a side door that’s much bigger than a Roth IRA ever was.
Here’s the mechanics, simplified. The $24,500 you defer is not the real ceiling on a 401(k). The total limit for 2026, counting your deferrals, your employer’s match, and a third category called after-tax contributions, is $72,000. If your plan allows after-tax contributions and lets you convert them to Roth inside the plan, you can fill most of that gap with money that grows tax-free from then on. That’s the strategy people call the mega backdoor Roth.
Now, not every plan offers it. Vanguard’s How America Saves report shows roughly a quarter of plans allow after-tax contributions, and about a third allow in-plan Roth conversions. So it’s genuinely a coin flip whether you have access. But here’s the thing — most people have never asked. The feature sits unused in the plan document because nobody thought to look.
I think that’s a big opportunity. For someone with strong cash flow who’s already maxing the regular limit, this can be tens of thousands of dollars a year moving into tax-free territory. And if your plan doesn’t offer it, that’s worth knowing too, because employers do add these features when enough participants ask.
Mistake #3: Putting Every Dollar in Pre-Tax and Building Tomorrow’s Tax Problem
The default choice for a high earner is pre-tax, and I understand why. If you’re in the 32% or 35% bracket, the deduction today is real money. For a lot of your dollars, pre-tax is the right call.
But when every dollar goes in pre-tax for twenty or thirty years, you’re not eliminating the tax. You’re deferring it, and it compounds right alongside your investments. Eventually the IRS comes to collect through required minimum distributions, and for a large balance those forced withdrawals can push you into high brackets in retirement, raise your Medicare premiums through IRMAA surcharges, and limit your flexibility at exactly the point you wanted options.
For example, a retiree with a seven-figure pre-tax balance can face a first-year required distribution large enough to create a five-figure tax bill, whether they need the income or not. That’s not a hypothetical edge case. That’s the normal outcome of a high earner doing pre-tax-only for a full career.
Interestingly, most plans now make it easy to do something about this. Vanguard’s data shows 86% of plans offer a Roth 401(k) option, but only 18% of participants use it. Unlike a Roth IRA, the Roth 401(k) has no income limit, so being a high earner doesn’t lock you out. The goal isn’t to swing entirely to Roth — it’s to build a mix, so future-you has both buckets to draw from and some control over your tax bracket in retirement. It depends on your current bracket, your expected retirement income, and your state, which is exactly why this deserves an actual analysis rather than a default setting.
The Common Thread
All three of these mistakes have the same shape. The 401(k) got set up years ago, it runs on autopilot, and nobody has looked under the hood since. The contribution timing, the after-tax feature, the pre-tax versus Roth split — those are all things we can work on, and none of them require changing your investments or your lifestyle. They just require someone actually reading the plan document and running your numbers.
As a fee-only, fiduciary financial planner, this is a lot of what I do for physicians and business owners. Tax efficiency is one of the biggest levers available to high earners, and the 401(k) is usually the first place we find money that’s being left behind.
We’ll take it a step at a time. If you’re a high earner and you can’t confidently answer whether your plan has a true-up, allows after-tax contributions, or whether your pre-tax/Roth split actually fits your situation, that’s something we can look at together.
This article is for educational purposes and is not tax, legal, or investment advice. Figures discussed are illustrative; past performance does not guarantee future results. Contribution limits referenced are for 2026 and are subject to change. Please consult a qualified professional about your specific situation.
References
IRS, 401(k) limit increases to $24,500 for 2026 (Notice 2025-67) – irs.gov
Fidelity Viewpoints, After-tax 401(k) contributions – fidelity.com
Charles Schwab, How Does a 401(k) Match Work? – schwab.com
Vanguard, How America Saves 2025 – vanguard.com