FDIC-Insured – Backed by the full faith and credit of the U.S. Government
Do you have a retirement plan in place? Most doctors today don’t retire until well into their 60s or later, but retirement planning can start at any age—the earlier, the better.
Doctors working in nonprofit hospitals or educational institutions may be offered a 403(b) plan as their employer-sponsored retirement option. We’re here to help you understand this retirement plan, if you’re eligible, and tips for maximizing your retirement savings.
What is a 403(b) Plan?
A 403(b) plan (also referred to as a tax-sheltered annuity (TSA) plan) is similar to a 401(k), allowing employees to contribute a portion of their income into a retirement account.
Benefits of 403(b) Plans
- Tax advantages: Contributions to your 403(b) plan are pre-tax, so when you put money into it, it reduces your taxable income.
- Employer contributions: Many employers offer to match a percentage of your contributions. This is essentially free money toward your retirement.
- Simplicity: With defined contributions and automatic investment, your retirement savings can grow with little to no involvement from you.
Are you eligible?
Retirement 403(b) plans are available to:
- Employees of public schools, colleges, and universities
- Employers of 501(c)(3) nonprofit organizations
- Ministers and certain clergy members
Physicians, dentists, and veterinarians who are employed by nonprofit hospitals or academic medical centers are often eligible for this plan.
How 403(b) Compares To Other Retirement Accounts
| Retirement Plans | Tax Treatment of Contributions | 2025 Contribution Limits | Tax Treatment of Withdrawals | Employer Matching? |
|---|---|---|---|---|
| 403(b) Plan | Allowable contributions reduce taxable income | $23,500 | Taxed when withdrawn | Sometimes |
| 401(k) Plan | Allowable contributions reduce taxable income | $23,500 | Taxed when withdrawn | Often |
| Roth IRA | Contributions do not lower taxable income | $7,000 ($8,000 for age 50+) | Tax-free withdrawals | Never |
| Traditional IRA | Allowable contributions may reduce taxable income, depending on income and workplace plan participation | $7,000 ($8,000 for age 50+) | Taxed when withdrawn | Never |
Contribution limits
There are annual limits for contributions to 403(b) retirement plans. For 2025, the limit is $23,500 or 100 percent of the doctor’s compensation, whichever is lesser. Doctors who are over 50 years old can contribute an additional $7,500.
Investment Options
Retirement 403(b) plans typically offer a range of investment choices, although the options may vary by plan administrator. Common investment options include:
- Mutual funds allow for diversification by pooling money from multiple investors. They are often categorized by risk level, such as aggressive, balanced, or conservative funds.
- Target-date funds are designed to adjust the risk level automatically as you approach retirement age.
- Annuities provide a guaranteed income stream in retirement.
Before choosing one of these options, evaluate the fees and performance of these investment options. While mutual funds and target-date funds offer lower fees and higher transparency, annuities may carry higher costs that can reduce long-term growth.
A financial advisor can help you understand which option is best for you.
Tips to get the most out of your 403(b) plan
1. Contribute enough to receive the full employer match
If your employer offers a matching contribution, make it a priority to contribute enough to capture the full match. This can significantly increase your retirement savings over time.
2. Review investment options regularly
Take the time to evaluate your plan’s investment options and ensure your portfolio aligns with your risk tolerance and retirement timeline.
3. Utilize catch-up contributions
Doctors often face a late start in retirement savings due to extended training periods. Catch-up contributions can help close the gap, especially after age 50 or for those eligible for the 15-year rule.
4. Diversify investments
Avoid putting all your contributions into one type of fund or asset class. Diversification can help mitigate risk and improve long-term growth potential.
5. Understand the fees
High fees can erode your retirement savings over time. Choose low-cost funds whenever possible and avoid unnecessary expenses.
6. Plan for taxes
Work with a financial advisor or accountant to develop a tax-efficient withdrawal strategy that minimizes taxes during retirement.
Deciding if a 403(b) retirement plan is right for you
Retirement planning can be daunting, but a well-thought-out plan of action can lessen stress immensely, giving you peace of mind that you’re on the right track.
For more information about retirement and other doctor topics, visit our Resource Library or check out one of our curated picks below:
