Retirement Retirement Planning

Wealthy Americans Are Rethinking This Common 401(k) Rule - Should You?

High earners are putting fewer dollars into their 401(k).

By Josh Koebert , Edited by Laura Hohenstein

Updated Nov. 11, 2026

Add Us On Google

"Max out your 401(k)" has long been treated as one of the smart moves for seniors and working adults alike, a piece of financial advice so widely repeated that most people follow it without questioning whether it actually applies to them.

But among high earners, the rate of maxing out has dropped sharply over the past several years, and the reasons why are worth understanding even if you're nowhere near the top of the income scale.

Now Available: The Definitive Guide to Retirement Income

Many successful investors eventually reach the same moment. The saving is done, the portfolio is built, and the question quietly changes from how much can I grow this to how much can I take out? Get that second question wrong and decades of good investing can come apart in a handful of years.

That is exactly what The Definitive Guide to Retirement Income helps answer. It covers what your retirement could actually cost, which income sources are worth using, and the withdrawal math that decides whether the money lasts. It is free today from Fisher Investments. Read More Here ›

The numbers behind the shift

Vanguard's How America Saves 2026 report found that about 51% of workers earning $150,000 or more maxed out their 401(k) last year. That sounds like a majority, but it's down from 60% in 2018. Among workers earning $100,000 to $149,999, the drop is even steeper, falling from 22% to just 10%.

Part of the explanation is mechanical. The 401(k) contribution limit is $24,500 in 2026, up from $18,500 in 2018. A worker earning $150,000 now needs to put in about 16% of their pay to hit the ceiling, compared to about 12% eight years ago. Reaching the max simply costs more than it used to.

But the bigger shift is strategic. As Craig Copeland of the Employee Benefit Research Institute put it, "We need to be more sophisticated than just max it out."

Shopping for cheaper auto insurance? Enter your zip code here to get started.

The tax logic that's changed

The 401(k) was built during an era when the top federal income tax rate was 70%. Deferring income then was an obvious win. Today the top rate is 37%, which means the gap between what you save now and what you'll owe later has narrowed considerably.

The math depends entirely on what tax bracket you expect to be in during retirement. If you earn a high income now and expect a modest retirement income, deferring makes sense. But if your savings are large enough to generate significant withdrawals, the bet looks different.

Required minimum distributions are a major part of that calculation. The IRS requires retirees to start drawing down traditional 401(k) and IRA balances starting at age 73 (for those born in 1959 or earlier), whether they need the money or not. Those forced withdrawals are taxed as ordinary income and can push retirees into a higher bracket than they expected.

The early-retirement problem

There's another issue that doesn't show up in standard 401(k) advice: access. Traditional 401(k) money generally cannot be withdrawn before age 59 1/2 without a 10% penalty on top of ordinary income taxes.

For anyone planning to retire early, that restriction matters. A large 401(k) balance can look great on paper and be mostly inaccessible for a decade or more. That's one reason some high earners are cutting contributions to the match level and redirecting the rest to accounts with fewer strings attached.

Released: The Definitive Guide to Retirement Income (Sponsor)

Most people spend their entire working lives focusing on one thing: growing a pile of money. Then they retire and discover the skill they actually need is close to the opposite. Turning that pile into steady income, year after year, through good markets and bad, without ever running out. It may be the least discussed and most consequential transition in personal finance, and plenty of otherwise careful investors walk into it with no real plan.

That is exactly what The Definitive Guide to Retirement Income helps answer. It is a free guide from Fisher Investments covering what your retirement will really cost, where the cash flow should come from, and how much you can safely withdraw each year. Learn More Here ›

Where the money goes instead

The most tax-efficient redirect for people with a high-deductible health plan is an HSA. The 2026 contribution limit is $4,400 for self-only coverage and $8,750 for a family, and the account offers a triple tax advantage: Contributions go in pretax, growth is untaxed, and withdrawals for qualified medical expenses are tax-free.

After 65, the account works like a traditional IRA for non-medical withdrawals. Unlike 401(k) contributions, HSA contributions made through payroll also avoid FICA taxes.

For tax-free growth without the withdrawal restrictions, a Roth IRA is the next option. High earners typically can't contribute directly because of income limits, but the backdoor Roth IRA strategy lets them contribute to a nondeductible traditional IRA and then convert it to a Roth. The 2026 IRA limit is $7,500, or $8,600 for those 50 and older.

Taxable brokerage accounts round out the options. There are no contribution limits, no restrictions on when you can withdraw, and no required minimum distributions. Long-term capital gains are taxed at lower rates than ordinary income, and the fund selection is typically broader than what most 401(k) plans offer.

The hierarchy that still holds

None of this means abandoning the 401(k). The employer match is still free money, and no other account offers that. The first priority for every earner is capturing the full match, whatever that requires.

After that, the right order depends on two things: your expected tax rate in retirement and when you plan to need the money. If you expect to be in a lower bracket later, traditional 401(k) contributions still make sense. If you expect to be in a similar or higher bracket, or if you want access before 59 1/2, routing dollars to an HSA, Roth, or brokerage account first may serve you better.

Bottom line

The max-it-out rule made more sense when tax rates were higher, and the contribution ceiling was lower. For high earners especially, where the money goes after the match can matter as much as how much is being saved overall.

One detail to keep in mind: Some 401(k) plans now offer a Roth 401(k) option, which combines the high contribution limits of a workplace plan with the tax-free withdrawal treatment of a Roth IRA. If your plan offers it and you expect to be in a similar or higher bracket in retirement, the Roth 401(k) may let you get the best of both accounts. Talking to a financial advisor about which combination best fits your retirement goals is worth the conversation.

More from FinanceBuzz: