BEST Financial Advisor Physicians 2025 (VIRTUAL)

Financial Planning for Physicians: A Step-by-Step Guide to Building Retirement Savings

As a physician, planning for retirement can seem overwhelming, but following a clear and structured approach helps ensure you build the financial future you deserve. One key rule of thumb is to save at least 20% of your income for retirement. Here’s a step-by-step guide to structuring your retirement savings using various accounts in an efficient order:

1. Maximize Your Traditional 401(k) up to Employer Match

The first step in retirement savings is to take full advantage of your employer’s 401(k) match. This is essentially free money that boosts your retirement contributions. If your employer offers a match, contribute enough to get the full benefit before moving on to other accounts.

2. Contribute to an HSA (Health Savings Account) if Offered

If your health insurance plan includes an HSA option, contribute to it up to the annual limit. HSAs are incredibly tax-efficient because contributions are pre-tax, growth is tax-free, and withdrawals are tax-free when used for qualifying medical expenses. For many, it doubles as both a health savings account and a stealth retirement account.

3. Fund a Roth IRA up to the Annual Limit

The next step is to contribute to a Roth IRA, which allows your investments to grow tax-free, and withdrawals in retirement are tax-free as well. The contribution limit is $6,500 in 2024 (or $7,500 if you’re over 50). While eligibility is based on income, physicians often qualify through backdoor Roth contributions.

4. Max Out the Traditional 401(k)

Once you’ve contributed to the Roth IRA, return to your 401(k) and contribute up to the annual limit. For 2024, the 401(k) contribution limit is $23,000 ($30,500 for those over 50). Traditional 401(k) contributions are made pre-tax, which reduces your taxable income and helps grow your retirement savings.

5. Consider a Mega Backdoor Roth IRA (If Available)

Some 401(k) plans allow after-tax contributions beyond the annual pre-tax 401(k) limit, which can then be converted to a Roth IRA—this is known as the “mega backdoor Roth.” If your 401(k) supports it, this strategy allows for substantial Roth contributions, providing even more tax-free growth.

6. Invest in a Regular Taxable Brokerage Account

After maximizing tax-advantaged retirement accounts, turn to a regular taxable brokerage account. While you won’t receive the same tax breaks, this account provides flexibility and liquidity. It’s a great way to invest for goals outside of retirement or as an additional retirement income source.

Final Thoughts BEST Financial Advisor Physicians 2025 (VIRTUAL)

By following these steps, physicians can effectively build wealth for retirement while maximizing tax efficiency. Structured planning helps ensure that your hard-earned income works as hard as you do, setting the stage for a secure and prosperous retirement.

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