Retirement Definitions​ & FAQs


A 401(k) is a tax-advantaged retirement account offered by most employers to their employees. You can contribute to your 401(k) account through automatic payroll withholding. Many employers match some or all of their employees’ contributions. The investment earnings in a 401(k) plan are not taxes until the employee withdraws funds.


A 403(b) is a retirement account for employees of tax-exempt organizations. 403(b)s often include faster vesting of your funds and the ability to make additional catch-up contributions.


A 457 is a retirement account offered by state governments, local governments, and some nonprofit organizations. Participants can contribute 100% of their salary, provided it does not exceed the applicable dollar limit for the year. Any interest and earnings generated by the plan are not taxed until withdrawn.

Traditional IRA

A traditional IRA is an individual retirement account that allows individuals to direct pre-tax income towards investments that can grow tax-deferred. Upon retirement, withdrawals are taxed at the IRA owner’s current income tax rate.

Roth IRA

A Roth IRA is an individual retirement account that allows withdrawals on a tax-free basis provided certain conditions are met. Roth IRAs are funded with after-tax dollars and the contributions are not tax-deductible.

Roth IRAs are for individuals making under $140,000 annually, or married couples making under $280,000 annually.

W-2 Employee Taxes

A W-2 employee is someone whose employer deducts taxes from their paychecks and submits this information to the government.

A Form W-2 is also known as the Wage and Tax Statement, is the document that employers are required to send to each employee and the IRS at the end of each year. The form reports the employee’s annual wages and the amount of taxes withheld from the paychecks.

1099 Contractor Taxes

Physicians who work as independent contractors are required to fill out a form 1099.

A form 1099 is used to provide information to the IRS about the various income an individual received outside of their regular salary. Taxpayers need to report all of their income to the IRS in order to avoid an audit.

Retirement Frequently Asked Questions

For almost everyone, a 401(k) is the first place you should start contributing to, especially if your employer matches your contributions. Most physicians have the cash flow to contribute the maximum amount and in many cases we recommend doing so.

Contributing to your 401(k) gives you a tax deduction and lowers your tax liability. Your contributions grow tax deferred, but withdrawals are fully taxable at your income tax rate at the time. Our advisors can help you strategize how to minimize your tax rate when it comes time to tap into your account.

In 2021, the most you can contribute to a 401(k) is $19,500. Self employed physicians have the ability to include profit sharing to their 401(k) plans which you can contribute up to $58,000 per employee (or 100% of their salary, whichever amount is less). Be aware that if you want to utilize profit sharing, you must do so for all your employees.

If you have other means to save for retirement in a tax free accumulating account(s), then consider a Traditional 401(k) over a Roth 401(k). Remember this includes a tax liability in the future upon withdrawal. If you don’t have any other options for tax free accumulation retirement savings, then consider a Roth 401(k).

If you have a 401(k) from a previous employer, you can usually roll it over to a Traditional IRA if those savings are from pre-taxed income or into a Roth IRA if the savings are post taxed income. You have more options and control -an potentially lower fees -over your own IRA versus rolling these savings into another employer offered 401(k).

Many high income earning physicians roll their 401(k) to a Roth IRA because Roth IRA income limitations don’t apply to this type of conversion.

We generally recommend the 50, 30, 20 rule when it comes to budgeting for physicians and their families. This would include saving 30% of your take home pay after taxes.

Depending on your personal goals you many want to save more in order to achieve the type of retirement lifestyle you want or if you would like to leave a legacy behind for your children or other family.

Knowing when you should retire requires an evaluation of your existing assets, liabilities, growth rates, tax rates, your cost of living, inflation and even medical expenses. The last few years of your life can deplete your savings from medical expenses. Understanding how these factors impact your living expenses can help you plan for when you no longer have a working income and when you can rely on your savings.

There’s no way to predict how long your retirement will last, especially as with advances in technology and life expectancy increasing. Our goal is to help you create a plan to avoid overspending your savings while still enjoying your retirement.

There is a 10% penalty of early withdrawal from a 401(k) before the age of 59.5. You will also have taxes withheld depending on your income tax rate.

Yes. A spousal IRA is the most common approach. Each spouse can have a traditional or Roth IRA (or both) that the working spouse contributes to as well as their own.

Retirement Planning for Physician Families

Whether you are nearing retirement or are already retired, making your money last your entire lifetime is our main concern. Our approach creates a custom plan for you to reach financial independence and enjoy your years in retirement.

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