Have you started saving for retirement? If you have, are you contributing enough to meet your retirement needs? If you haven’t, today is the perfect time to start.

Many doctors start their careers behind in retirement savings because of their lengthy education and training. If you are one of these doctors playing catch up to fund your retirement, there are tools to help you make the most of your funds.

Beyond the most common retirement accounts like 401(k)s and IRAs, what retirement accounts can help doctors make the retirement contributions they need to? Here’s a high-level summary of accounts and avenues for saving for retirement.

Most Common Retirement Options

Two of the most common retirement accounts are 401(k)s and IRAs.

401(k)s are employer-sponsored retirement plans that allow you to put a portion of each paycheck toward your retirement savings. Employers will often match a percentage of your contribution. 401(k) investment gains are taxed when they are withdrawn.

IRAs are individual retirement accounts that are self-funded. Though traditional IRAs are an option, Roth IRAs are often the smarter choice for some early career doctors, especially residents who are typically in a lower tax bracket. Roth IRA contributions grow with the account tax-free, meaning you won’t pay income tax when you withdraw.

Read more about 401(k)s and IRAs here.

Other Retirement Accounts for Physicians

401(k)s and IRAs may be some of the most commonly used retirement accounts for the average American, but there are many other accounts that you may encounter.

401(k) Alternatives

403(b) accounts are the same as 401(k)s except that they are offered by non-profit organizations. Doctors who work for some hospitals or academic medical centers may qualify for this type of account. This retirement vehicle can be treated the same as a 401(k).

Solo 401(k)s are for self-employed individuals, like medical practice owners. These can only be used if you have no employees, so this tool likely will not help many physicians.

Other Retirement Options

457(b) plans are a great retirement option for some physicians. This is another type of employer-sponsored retirement vehicle that takes funds from your paycheck pre-tax. State and local governments and other tax-exempt employers are eligible to offer these plans.

If your employer offers both a 457(b) and either a 401(k) or 403(b), you are able to contribute to both. In 2024, the max contribution for each account is $23,000, meaning if you fully fund both you can contribute $46,000 in just one year. This retirement account coupled with others can help you catch up in savings if you weren’t able to contribute significantly or at all during school and training.

Backdoor Roth IRAs are another IRA option that may benefit doctors. Roth IRAs have income limits, meaning if you make more than a certain amount, you can’t contribute to a Roth IRA. In 2024, the limits are $161,000 for single filers and $240,000 for married couples filing jointly.

These limits may prevent many doctors from contributing to a Roth IRA. The Backdoor Roth IRA provides a work-around by allowing you to first contribute to a Traditional IRA then converting the funds to a Roth IRA.

Simplified Employee Pension (SEP) IRAs are retirement savings plans tailored for self-employed individuals and small business owners. Contributions to a SEP IRA are made by the employer (or self-employed individual) and are typically tax-deductible. Employers can contribute up to 25% of an employee’s compensation or a maximum dollar amount set by the IRS each year.

Employees are eligible to participate if they meet certain criteria, including age, length of employment, and minimum compensation thresholds. Contributions grow tax-deferred until retirement, at which point withdrawals are taxed as ordinary income.

Savings Incentive Match Plan for Employees (SIMPLE) IRAs are another retirement savings plan designed for small businesses with 100 or fewer employees. This IRA type is more similar to a 401(k) than other IRA options.

Employers must generally contribute to the plan each year, either by making matching contributions based on employee contributions or by making non-elective contributions regardless of whether the employee contributes. This provides an incentive for employees to save for retirement while also giving employers flexibility in how they structure their contributions.

Health Savings Accounts (HSA) are not technically retirement accounts but can be beneficial to your retirement strategy. HSAs are triple-tax advantaged because contributions are made pre-tax, the funds in an HSA grow tax-deferred, and if used for qualifying medical expenses, distributions can be used tax-free.

Using an HSA isn’t recommended for everyone as a high-deductible health plan (HDHP) is required to be eligible to contribute to an HSA. Consider your medical needs and how an HDHP would affect those needs before using this strategy.

Profit-sharing plans allow employers to contribute as much or as little as they would like, but employees are not able to contribute to these. These are most common for small businesses and could be part of a physician’s benefit package.

Employers can contribute cash or stock shares equal to the lesser of $56,000 (or $62,000 after you turn 50) or the amount equal to 100% of your salary.

Saving for Retirement

There are many different retirement accounts and retirement savings strategies available to doctors. We recommend working with a financial advisor with experience working with doctors to make a plan that fits your needs and ensure you will have the savings you need once you reach your desired retirement age. Don’t be afraid to ask a potential financial advisor for references and to verify if they are a fiduciary.

Not saving enough for retirement is just one of many financial challenges doctors can face throughout their lifetimes. In a recent webinar, Dr. Michael Jerkins shared five common financial pitfalls that doctors encounter. Find a recording of the full webinar here or read our recap here.