The Best Retirement Accounts to Use During Residency and Fellowship

David Flynn, MD, MBA

Updated:

September 5, 2023

Published:

September 6, 2023

The Best Retirement Accounts to Use During Residency and Fellowship As a resident or fellow, your focus should be developing your clinical skills and managing the demands of your rigorous schedule. However, it's also critical to plan for your financial future. One of the most important aspects of a solid financial plan is saving. Retirement accounts provide a great way to save, but there are lots of options. Retirement accounts come with lots of confusing terms and restrictions, so choosing the best plan is often challenging. This article will provide a guide to help you navigate the world of retirement accounts as a resident or fellow. If you are an attending physician, you should check out our article for attendings.

Where to Start

‍1. Employer Match (401K or 403B)

If your employer offers a match, get it. An employer match is essentially free money. The specifics of matching contributions can vary, but a common arrangement is a 100% match on the first 3-6% of your salary that you contribute. Contribute enough to get any matching money available to you, then move on to your HSA or Roth IRA.

Make sure you understand your employer’s vesting requirements. If your employer has a 5-year vesting period, but your residency is only 3 years, you will not be vested when you finish training and will forfeit any matching funds.

You can contribute up to $22,500 into a 401K or 403B in 2023.

Any money you contribute is deducted from your adjusted gross income (AGI). If you are in an income-driven repayment (IDR) plan, contributions to a pre-tax retirement account will lower your student loan payments.

2. Health Savings Account (HSA)

Although not traditional retirement accounts, HSAs allow you to save money for the future and have better tax benefits than any retirement account. HSAs are triple-tax advantaged: contributions are made using pre-tax money, investment gains are untaxed, and distributions are untaxed if you use them for qualified medical expenses.

Unfortunately, you can only contribute to an HSA if you are enrolled in a high-deductible health plan. Contributions to an HSA reduce your AGI, so they will also lower your IDR student loan payments.

In 2023, you can contribute $3,850 (single coverage) or $7,750 (family coverage).

3. Roth IRA

Most residents are not offered an employer match, and many are not eligible for an HSA. That’s ok. If that’s you, start with a Roth IRA.

Roth accounts are best for people who expect to move into higher tax brackets in the future (like residents). With a Roth account, you pay taxes on the money you contribute but investment gains or distributions are tax-free.

In 2023, you can contribute $6,500 to a Roth IRA. However, you can only make the full contribution if your modified AGI is less than $138,000 (single) or $218,000 (married, filing a joint tax return).

Since Roth contributions are made with after-tax money, they do not reduce your AGI and therefore do not lower your IDR student loan payments.

4. 401K or 403B non-matching contribution

If you have money left over after contributing to your Roth IRA, then continue (or begin) contributing to your 401(k)/403(b). Remember, you can contribute up to $22,500 and contributions will decrease your student loan payments if you’re in an IDR plan.

Where to Start

‍1. Employer Match (401K or 403B)

If your employer offers a match, get it. An employer match is essentially free money. The specifics of matching contributions can vary, but a common arrangement is a 100% match on the first 3-6% of your salary that you contribute. Contribute enough to get any matching money available to you, then move on to your HSA or Roth IRA.

Make sure you understand your employer’s vesting requirements. If your employer has a 5-year vesting period, but your residency is only 3 years, you will not be vested when you finish training and will forfeit any matching funds.

You can contribute up to $22,500 into a 401K or 403B in 2023.

Any money you contribute is deducted from your adjusted gross income (AGI). If you are in an income-driven repayment (IDR) plan, contributions to a pre-tax retirement account will lower your student loan payments.

2. Health Savings Account (HSA)

Although not traditional retirement accounts, HSAs allow you to save money for the future and have better tax benefits than any retirement account. HSAs are triple-tax advantaged: contributions are made using pre-tax money, investment gains are untaxed, and distributions are untaxed if you use them for qualified medical expenses.

Unfortunately, you can only contribute to an HSA if you are enrolled in a high-deductible health plan. Contributions to an HSA reduce your AGI, so they will also lower your IDR student loan payments.

In 2023, you can contribute $3,850 (single coverage) or $7,750 (family coverage).

3. Roth IRA

Most residents are not offered an employer match, and many are not eligible for an HSA. That’s ok. If that’s you, start with a Roth IRA.

Roth accounts are best for people who expect to move into higher tax brackets in the future (like residents). With a Roth account, you pay taxes on the money you contribute but investment gains or distributions are tax-free.

In 2023, you can contribute $6,500 to a Roth IRA. However, you can only make the full contribution if your modified AGI is less than $138,000 (single) or $218,000 (married, filing a joint tax return).

Since Roth contributions are made with after-tax money, they do not reduce your AGI and therefore do not lower your IDR student loan payments.

4. 401K or 403B non-matching contribution

If you have money left over after contributing to your Roth IRA, then continue (or begin) contributing to your 401(k)/403(b). Remember, you can contribute up to $22,500 and contributions will decrease your student loan payments if you’re in an IDR plan.

‍1. Employer Match (401K or 403B)

If your employer offers a match, get it. An employer match is essentially free money. The specifics of matching contributions can vary, but a common arrangement is a 100% match on the first 3-6% of your salary that you contribute. Contribute enough to get any matching money available to you, then move on to your HSA or Roth IRA.

Make sure you understand your employer’s vesting requirements. If your employer has a 5-year vesting period, but your residency is only 3 years, you will not be vested when you finish training and will forfeit any matching funds.

You can contribute up to $22,500 into a 401K or 403B in 2023.

Any money you contribute is deducted from your adjusted gross income (AGI). If you are in an income-driven repayment (IDR) plan, contributions to a pre-tax retirement account will lower your student loan payments.

2. Health Savings Account (HSA)

Although not traditional retirement accounts, HSAs allow you to save money for the future and have better tax benefits than any retirement account. HSAs are triple-tax advantaged: contributions are made using pre-tax money, investment gains are untaxed, and distributions are untaxed if you use them for qualified medical expenses.

Unfortunately, you can only contribute to an HSA if you are enrolled in a high-deductible health plan. Contributions to an HSA reduce your AGI, so they will also lower your IDR student loan payments.

In 2023, you can contribute $3,850 (single coverage) or $7,750 (family coverage).

3. Roth IRA

Most residents are not offered an employer match, and many are not eligible for an HSA. That’s ok. If that’s you, start with a Roth IRA.

Roth accounts are best for people who expect to move into higher tax brackets in the future (like residents). With a Roth account, you pay taxes on the money you contribute but investment gains or distributions are tax-free.

In 2023, you can contribute $6,500 to a Roth IRA. However, you can only make the full contribution if your modified AGI is less than $138,000 (single) or $218,000 (married, filing a joint tax return).

Since Roth contributions are made with after-tax money, they do not reduce your AGI and therefore do not lower your IDR student loan payments.

4. 401K or 403B non-matching contribution

If you have money left over after contributing to your Roth IRA, then continue (or begin) contributing to your 401(k)/403(b). Remember, you can contribute up to $22,500 and contributions will decrease your student loan payments if you’re in an IDR plan.

Key Takeaways

Starting your retirement savings early will pay off in the long run due to the power of compounding. If your employer offers a match, make sure to get it. After that, move on to an HSA (if you’re eligible), and then a Roth IRA before returning to your 401K or 403B for non-matched contributions. As an added bonus, contributions to pre-tax accounts will reduce your student loan payments if you’re in an income-driven repayment plan.

The Best Retirement Accounts to Use During Residency and Fellowship

David Flynn, MD, MBA

Where to Start

Where to Start

Key Takeaways

About

David Flynn, MD, MBA