Thinking about retirement plans for doctors can feel overwhelming when you are already busy running a practice or seeing patients all day. There are so many options with different rules and limits that it is hard to know which one actually fits your situation.
The good news is you do not need to learn every technical detail. What matters is understanding the main choices available to physicians and how they work in real life.
In this post, we’ll walk through the most common retirement plans, highlight when each makes sense, so you can picture how they might work for you.
Solo-Owner vs Employee-Physician
As a solo-owner, you own the practice, and you are basically the only person on the payroll. You have choices that let you save a lot, and those choices are built around the money you pay yourself as salary.
If you’re employed as a physician, you work for a hospital, health system, or a larger medical group that already offers a retirement plan. Your main option will be the employer plan, plus any extra personal accounts you can use outside the plan.
Solo 401(k)
As the name suggests, a solo 401(k) is best when you’re going at it solo. It’s like a regular 401(k) but for a business with no full-time employees other than the owner, and maybe a spouse. It lets you put money aside both as an employee and as the employer, so you can save more in one year than with many other plans. One of the most effective options in Retirement Plans For Doctors. This plan can include a Roth option or a loan feature, depending on the provider, making it a key strategy to consider when exploring different Retirement Plans For Doctors.
This option suits early-career physicians starting a solo practice who do not have a staff yet, or doctors who are sole owners and want the highest possible annual savings without the complexity of covering employees.
SEP IRA
A SEP IRA (Simplified Employee Pension Individual Retirement Arrangements) is a simple arrangement that can work for owners and employers alike. It’s a retirement account that your practice funds on behalf of eligible employees and the owner.
It is very easy to set up and light on administration. The employer decides each year whether to make a contribution. If the employer contributes, the same percentage of compensation must be used for all eligible employees. The contribution is based on a percentage of pay up to a dollar cap, and the employer expense is generally tax-deductible—an important consideration when evaluating Retirement Plans For Doctors.
This arrangement works well for solo owners who want a fuss-free way to make large employer contributions for themselves, or small practice owners who want the option to contribute for staff in good years, but don’t want the paperwork of a full 401(k).
SIMPLE IRA
A SIMPLE IRA is a basic retirement plan designed for small employers, and it can also work for a solo-owner physician, who meets the plan rules. Employees can make salary deferrals and the employer must either match a portion of those deferrals or make a small fixed contribution. That means there is an employer cost, but administration is light compared with a full 401(k).
To adopt a SIMPLE IRA, your practice generally must have had no more than 100 employees who earned at least $5,000 in the prior year. Due to the fact that employee deferral limits are lower than a 401(k), solo owners who want to maximize annual savings often compare SIMPLE IRAs with a solo 401(k) or SEP before deciding—an important consideration in Retirement Plans For Doctors.
Small clinics that want an easy, low-cost plan and are comfortable with a required employer contribution usually go for a SIMPLE IRA. It’s also an option for solo physicians who want a very simple way to offer themselves retirement savings, and who do not need the higher contribution room of a 401(k) or SEP.
Cash-Balance Plans
A cash-balance plan is a type of pension plan that’s set up by the employer and can allow very large tax-deductible contributions for high earners in a short period. These plans use actuarial math to set required funding each year, so they are more complex and more expensive to run than a 401(k) or SEP. Because of that complexity, they are used when the goal is to accelerate savings significantly, usually later in a career—making them an advanced option in Retirement Plans For Doctors.
We usually recommend this for older physicians or practices with strong profits that want to make very large retirement contributions and take a big tax deduction now.
Other Considerations When Choosing Between Retirement Plans for Doctors
- If you run an S-corp, retirement contributions are calculated from the salary you pay yourself as W-2 wages, not from distributions. That means paying yourself a reasonable salary matters if you want to contribute to a plan.
- Retirement plans that include employees have extra rules, such as nondiscrimination testing and the need to treat eligible employees fairly. That can make a seemingly cheap plan more expensive when staff must be included.
- Combining plans is common. Many physician owners use a 401(k) for regular employee deferrals and add a cash-balance plan when they want to accelerate savings. That pairing needs modeling from a CPA and an actuary, so you know the payment obligations an important strategy when evaluating Retirement Plans For Doctors. For additional tax-saving strategies, see our article on How Doctors Can Use the Short-Term Rental (STR) Loophole to Lower Taxes.
How MedTax Helps
Choosing the right retirement plan is not about mastering IRS jargon. It is about matching your practice, income, and future goals with a plan that feels doable and gives you the best tax and savings outcome.
For some doctors, that may be a simple, low-maintenance plan. For others, it might be layering plans to save more aggressively as income grows.
At MedTax, we work with physicians every day to make these decisions clear and manageable. If you are ready to see what retirement savings could look like for you, we can run the numbers and help you move forward with confidence.
Book a call with us today!
