Physician Wealth

Physician Retirement Planning: The Late Start Problem

Catching Up After a Decade of Training

Physicians finish training at 30-35 with significant debt. Learn how to catch up on retirement savings through aggressive tax-advantaged strategies and Section 7702.

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30-35

Typical Age When Training Ends

$23K-$69K

401(k) Contribution Range (2024)

25-35%

Recommended Savings Rate

$5M+

Reasonable Retirement Target

Quick Answer

Physicians start saving 8-13 years later than peers - aggressive catch-up is required through compressed savings timeline
Stack tax-advantaged accounts: 401(k) with match + backdoor Roth + HSA + mega backdoor Roth + Section 7702
Never leave employer match on the table - a 50% match at $400K income is $12K/year in free money
Backdoor Roth IRA is essential for high-income physicians - $7K/year grows to $500K+ tax-free over 30 years
Live like a resident for 2-3 years after training - avoid lifestyle inflation until retirement foundation is built

The Opportunity

Why This Matters for Physicians

The Compressed Timeline Reality

Physicians finish training at 30-35, often with $300K+ debt. While peers have been saving since 22, you are starting 8-13 years behind. This compressed timeline requires aggressive savings rates and tax-efficient vehicles to catch up.

401(k)/403(b) Maximization

Hospital-employed physicians often have access to excellent 401(k) or 403(b) plans with employer matching. Maxing contributions ($23,000 in 2024, plus $7,500 catch-up after 50) is foundational. Never leave matching funds on the table - it is immediate 100% return.

Backdoor Roth IRA Strategy

Physician incomes exceed Roth IRA limits, but the "backdoor" strategy allows contributions. Contribute $7,000 to traditional IRA, convert immediately to Roth. Tax-free growth and no RMDs make this essential for high earners.

Section 7702 for Tax-Free Income

After maxing 401(k), backdoor Roth, and HSA, high-income physicians need additional tax-advantaged savings. Section 7702 policies offer unlimited contributions, tax-free growth, and tax-free retirement income via policy loans.

Implementation

Proven Strategies

Maximum Tax-Advantaged Contribution Stack

Stack all available tax-advantaged accounts: 401(k)/403(b) with employer match, backdoor Roth IRA, HSA (if HDHP), and mega backdoor Roth if available. This creates $40K-$70K+ in tax-advantaged savings capacity before even considering Section 7702.

Best for: All attending physicians who want to maximize tax-advantaged savings before adding taxable accounts.

Example:

401(k): $23K + employer $11K = $34K. Backdoor Roth: $7K. HSA: $8.3K family. Total: $49K+ tax-advantaged. Add mega backdoor Roth if available for another $46K.

Section 7702 Accelerated Funding

For physicians with $350K+ income, max 401(k), Roth, and HSA, then fund Section 7702 policy aggressively. Target $50K-$100K/year in premiums. Cash value grows tax-free, accessible via tax-free loans for retirement income or major purchases.

Best for: High-income physicians ($350K+) who have maxed traditional accounts and want additional tax-free retirement income.

Example:

$100K/year Section 7702 funding for 15 years = $1.5M contributed. Cash value at 65: $2.2M+ accessible tax-free. Provides tax diversification beyond 401(k)/IRA.

Catch-Up Strategy for Late Starters

Physicians finishing training at 35+ need aggressive catch-up: max all accounts immediately, avoid lifestyle inflation, live on less than half your attending income, and use mega backdoor Roth and Section 7702 to accelerate savings.

Best for: Physicians who finished training later and need to aggressively catch up on retirement savings.

Example:

Age 35 physician, $400K income: Max 401(k) $23K + match $20K + backdoor Roth $7K + HSA $8K + mega backdoor $46K + Section 7702 $50K = $154K/year tax-advantaged savings. On track for $5M+ by 60.

Avoid These Pitfalls

Common Mistakes

Lifestyle Inflation After Training

The jump from $60K resident salary to $350K+ attending income creates enormous lifestyle inflation pressure. Many physicians spend everything they make, never catching up on retirement. Live like a resident for 2-3 years while building retirement foundation.

Ignoring Backdoor Roth

Many physicians assume they cannot contribute to Roth IRAs due to income limits. The backdoor Roth strategy is legal, effective, and essential. $7,000/year growing tax-free for 30 years = $500K+ in tax-free retirement funds.

Not Maxing Employer Match

Leaving employer 401(k) match money on the table is giving away free money. A 50% match on 6% of salary at $400K income = $12K/year free money. Over 25 years at 8% growth = $877K lost if not captured.

Questions

Common Questions

Here are the most common questions we receive about this topic.

Ask Your Question

Target 25-35% of gross income, especially if you started late. For a $400K income physician starting at 35, saving $100K-$140K/year puts you on track for $5M+ by age 60-65. Use all available tax-advantaged vehicles before taxable accounts.

Never too late, but the math becomes more challenging. At 40 with zero savings, you need $150K+/year savings for 25 years to reach $5M. This is achievable for high-income physicians but requires discipline. Consider working a few extra years to extend the runway.

Generally: capture full employer 401(k) match (free money), then decide based on loan interest rate. If loans are 6%+ and you do not qualify for PSLF, split focus between loan payoff and retirement. If pursuing PSLF, minimize loan payments and maximize retirement contributions.

If your 401(k) allows after-tax contributions (beyond the $23K limit) and in-service conversions, you can contribute up to $69K total (2024) to your 401(k). The after-tax portion can be converted to Roth. This creates an additional $46K+ Roth contribution opportunity annually.

After maxing 401(k), backdoor Roth, and HSA, Section 7702 provides additional tax-advantaged savings with no contribution limits. Cash value grows tax-free, accessible via tax-free loans for retirement income, college funding, or major purchases. Creates tax diversification beyond traditional retirement accounts.

Ready to Accelerate Your Retirement Savings?

Every physician has unique circumstances. Let us create a personalized strategy that catches you up and maximizes tax-advantaged growth.

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