Finding the “sweet spot” for a Fender Telecaster‘s neck pickup height can require some trial and error. We start with the pickup about 3/32″ from the strings, when the strings are held down at the highest fret. But you’ll probably need to adjust it up and down to find the best combination of output, openness, and sustain.
When we do this, we take off the pickguard, and leave it off. There’s no need to reinstall the pickguard after you make each adjustment. Take off the pickguard, and plug in the guitar. Adjust the height, then play and listen. Adjust, play, and listen. Repeat until you are satisfied with the neck pickup’s response. Then, when you’re all done, put the pickguard back on.