Retirement Account Strategies for Physicians

Physicians have access to some of the most powerful retirement vehicles in the tax code—but most don't fully utilize them. The difference between maximizing your retirement contributions and just "contributing enough to get the match" can easily mean an extra $500,000-$1,000,000 in retirement wealth.

This guide breaks down every retirement account available to physicians, how to maximize each one, and advanced strategies like the backdoor Roth IRA and mega backdoor Roth that can supercharge your tax-free retirement savings.

The Foundation: 401(k) and 403(b) Plans

Your employer-sponsored retirement plan is your primary wealth-building tool. Whether you have a 401(k) (most private practices and hospitals) or 403(b) (non-profit hospitals and academic institutions), the rules are essentially the same.

2026 Contribution Limits:

• Employee Contributions: $23,500 (under 50) or $31,000 (age 50+)
• Total Contributions (employee + employer): $70,000 (under 50) or $77,500 (age 50+)

Tax Savings: Every dollar you contribute reduces your taxable income dollar-for-dollar. At a 37% federal + 10% state bracket, contributing the full $23,500 saves you $11,045 in taxes immediately.

The 457(b): The Double-Dip Opportunity

If you work for a non-profit hospital or government entity, you might have access to a 457(b) plan in addition to your 403(b). This is a massive opportunity because you can max out both in the same year.

457(b) Benefits:

• Separate contribution limit: $23,500 in addition to your 403(b)
• No early withdrawal penalty: Can access funds before age 59—½ without the 10% penalty (unlike 401k/403b)
• Perfect for early retirement: Bridge the gap between retirement and age 59—½

Maximum Strategy: Max both 403(b) ($23,500) + 457(b) ($23,500) = $47,000 in annual tax-deferred contributions. At a 45% combined tax rate, that's $21,150 in tax savings per year.

The Backdoor Roth IRA Strategy

As a high-income physician, you're almost certainly above the income limits for direct Roth IRA contributions. But there's a legal workaround: the backdoor Roth IRA.

Why It Matters:

While tax-deferred accounts like 401(k)s are great, Roth accounts offer something even better: tax-free growth and tax-free withdrawals in retirement. No required minimum distributions, no taxes on gains, and tax-free inheritance for your heirs.

How to Execute the Backdoor Roth IRA:

1. Open a Traditional IRA (if you don't have one)
2. Contribute $7,000 ($8,000 if age 50+) to the Traditional IRA as a non-deductible contribution
3. Wait a day or two (not required, but conservative approach)
4. Convert the Traditional IRA to a Roth IRA (call your broker and request the conversion)
5. Pay taxes on any gains (usually minimal if you convert quickly)
6. Report on taxes: Form 8606 documents the non-deductible contribution and conversion

The Mega Backdoor Roth: The Ultimate Strategy

The mega backdoor Roth allows you to contribute up to an additional $46,500 to Roth accounts annually—on top of your regular 401(k) contributions and backdoor Roth IRA.

Requirements (All must be met):

1. Your 401(k) plan allows after-tax (non-Roth) contributions
2. Your plan allows in-service distributions OR in-plan Roth conversions
3. You're not already exceeding the $70,000 total contribution limit

How It Works:

1. Max out regular 401(k) contributions: $23,500
2. Get employer contributions (match + profit sharing): varies, let's say $20,000
3. Make after-tax contributions: $70,000 - $23,500 - $20,000 = $26,500
4. Immediately convert after-tax contributions to Roth 401(k) or roll to Roth IRA
5. All future growth is tax-free

Long-Term Value: Contributing an extra $26,500/year to Roth for 30 years at 8% return = $3.2 million completely tax-free. Compare to a taxable account which would be worth only $2.2 million after taxes.

Health Savings Account (HSA): The Triple Tax Advantage

Technically not a retirement account, but the HSA is actually the BEST retirement account if used strategically.

2026 Contribution Limits:

• Individual: $4,300
• Family: $8,550
• Catch-up (55+): Additional $1,000

The Physician HSA Strategy:

1. Contribute the maximum every year
2. Invest aggressively (treat it as a retirement account)
3. Pay all medical expenses out-of-pocket
4. Save all medical receipts
5. Let the HSA grow tax-free for 30+ years
6. At retirement, reimburse yourself for decades of expenses tax-free

Why This Works: There's no time limit on reimbursing yourself for medical expenses. A receipt from 2026 can be reimbursed in 2056—giving you 30 years of tax-free growth on that money.

Solo 401(k) for Side Income

If you have any self-employment income (locums, consulting, expert witness work, side business), you can open a Solo 401(k) with massive contribution limits.

2026 Contribution Limits:

• Employee Deferrals: 100% of compensation up to $23,500
• Employer Contributions: 20% of net self-employment income
• Total Limit: $70,000 ($77,500 if age 50+)

Example: You earn $50,000 from locum work. You can contribute $23,500 as employee deferral + $10,000 as employer contribution = $33,500 total. This reduces your taxable 1099 income from $50,000 to $16,500.

Taxable Brokerage Accounts: The Unsung Hero

After maxing all tax-advantaged accounts, don't neglect taxable accounts. While they lack special tax treatment, they offer:

• No contribution limits
• No withdrawal penalties
• Access before retirement
• Long-term capital gains rates (15-20%, lower than ordinary income)
• Step-up in basis at death (heirs inherit tax-free)

Optimization Strategies:

• Hold tax-efficient investments: Index funds, ETFs, growth stocks
• Tax-loss harvest annually: Offset gains or up to $3,000 ordinary income
• Hold >1 year for long-term rates: 15-20% vs. 32-37% ordinary income
• Use for early retirement bridge: Access funds before 59—½ without penalty

Asset Location Strategy

Where you hold investments matters as much as what you invest in.

Tax-Deferred Accounts (401k, 403b, Traditional IRA):

• Bonds and fixed income (taxed as ordinary income)
• REITs (ordinary income dividends)
• Actively managed funds (frequent capital gains distributions)

Roth Accounts:

• Highest expected growth assets (growth stocks, small-cap value)
• Tax-inefficient investments that you'd otherwise avoid
• Anything with big future appreciation potential

Taxable Accounts:

• Tax-efficient index funds and ETFs
• Individual stocks you'll hold long-term
• Municipal bonds (tax-free income)
• I Bonds for emergency fund (tax-deferred, inflation-protected)

The Physician Retirement Contribution Roadmap

Here's the optimal order to fill your buckets:

1. 401(k)/403(b) to match: Free money, always do this first
2. HSA max: Triple tax advantage beats everything
3. Max 401(k)/403(b): $23,500 employee contributions
4. Max 457(b): If available, another $23,500
5. Backdoor Roth IRA: $7,000 to Roth
6. Mega Backdoor Roth: If plan allows, up to $46,500 more to Roth
7. 529 Plans: If you have kids, save for college tax-free
8. Taxable Brokerage: Unlimited contributions for additional savings

Maximum Annual Contributions (2026): With access to all vehicles, a married physician couple could contribute:

• 401(k): $47,000 × 2 = $94,000
• 457(b): $47,000 × 2 = $94,000 (if available)
• Backdoor Roth: $14,000 (or $16,000 if both 50+)
• Mega Backdoor Roth: $53,000 × 2 = $106,000 (if plans allow)
• HSA: $8,550 (family) + $2,000 (both 55+) = $10,550

Total: $318,550+ per year in tax-advantaged retirement savings.

Common Mistakes to Avoid

• Only contributing to get the match: Leaving tens of thousands in tax savings on the table
• Ignoring the backdoor Roth: Missing years of tax-free growth
• Not checking if your plan allows mega backdoor Roth: Could be missing $46,500/year to Roth
• Contributing to Roth 401(k) as attending: Usually better to do traditional and backdoor Roth IRA instead
• Not maxing HSA: The triple tax advantage makes it the best account
• Forgetting about 457(b) if available: Doubling your retirement contributions

Final Thoughts

Retirement accounts aren't sexy. Nobody gets excited about contribution limits or tax-deferred growth. But for physicians, systematically maxing these accounts is how you build $5-10 million in retirement wealth.

The key is starting early and being consistent. A 35-year-old physician who maxes all available accounts ($70K+ annually) will have $8-10 million by age 65. The same physician who only does the minimum to get the match might have $2-3 million.

Don't leave millions on the table. Start maximizing your retirement accounts today.