Physician retirement planning: tips, savings strategies and advice

According to a Sermo poll, 55% of physicians surveyed don’t have savings or don’t know how much they have.

For physicians, high income can lead to financial freedom and a strong retirement plan—if you know what to focus on. With some intentional calculations and foresight, you can pursue financial independence and retire comfortably.

Here are some actionable insights on physician retirement planning.

As a doctor, how much should I save for retirement?

The gold standard of retirement planning for physicians is to invest enough so that, in your first year of retirement, you can maintain your lifestyle without reducing your principal, which means you can live off the interest or investment income. The average physician, regardless of specialty, can achieve this target over a typical 30-year timeframe by investing about 15% of their salary.

For example, if your pre-retirement lifestyle requires $80,000 annually, aim to have over $1.33 million invested by retirement age, as $80,000 is roughly 6% of $1.33 million.

Remember that there are no concrete rules about what to save and invest, and the average physician retirement savings vary greatly. Standard career investment horizons are sometimes longer than the 30 years we mentioned above—which means more chances to save—and you should generally aim to have more than you need in the bank.

Employer-sponsored retirement accounts and pension plans

Your workplace likely offers employer-sponsored retirement plans (ESPs). These include your standard 401(k)s and health savings accounts (HSAs). While 401(k)s are usually sufficient, here’s a guide to them and some other contribution plans employers may offer:

• 401(k)s: These are generally sound financial vehicles—80% of U.S. millionaires invested in theirs. You make 401(k) contributions on a pre-tax basis, and they grow tax-deferred. Employers may also match your contributions up to a small percentage of your salary.
• 403(b): The primary difference between 401(k)s and 403(b)s is eligibility. Employees of tax-exempt organizations are eligible for 403(b)s, but both investment vehicles are tax-deferred, have similar limits, and allow for employer contributions while imposing penalties for early withdrawals.
• HSAs: Expect to spend approximately $143,000–157,000 on medical expenses across retirement. HSAs are a triple tax-advantaged way to cover these costs, with pre-tax contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses.
• 457(b): This is a tax-deferred retirement plan typically offered by state and local government employers (and certain nonprofits). Its contribution limits are similar to a 401(k), but 457(b) plans often allow withdrawals upon separation from service without the 10% early withdrawal penalty, regardless of age.
• 401(a): A 401(a) is a retirement plan commonly used by government agencies, educational institutions, and nonprofits. The employer sets contribution requirements, and sometimes employee contributions are mandatory. Both the employer and employee can contribute, and distributions are taxed upon withdrawal.

Defined benefit plans versus defined contribution plans

Do doctors get pensions? Few do, but they usually come in the form of a defined benefit or contribution plan:

• Defined benefit plans: These plans guarantee retirees a fixed—usually monthly—payout for life. Employers bear the investment risk and responsibility. Defined benefits plans are increasingly rare because most companies prefer offering defined contribution plans.
• Defined contribution plans: These common plans transfer investment risk and responsibility to employees. They fund individual retirement accounts with contributions from both workers and employers. Payouts ultimately depend on accumulated savings and market performance.

The 401(k) is the most common type of defined contribution plan. Depending on whether you’re in public or private practice, you may benefit from a traditional 401(k) or solo 401(k).

Traditional 401(k)s offer a limited yet viable number of investment options—like mutual funds, index funds and exchange-traded funds (ETFs). The IRS sets an annual cap on 401(k) contributions. In 2025, it’s $23,500, or $70,000 for combined employee-employer contributions.

Solo 401(k) plans cater to private practice owners who have no employees or only employ a spouse. Similar to traditional 401(k) plans, they’re tax-deferred and offer a wider range of investment options and higher contribution limits.

Individual Retirement Accounts: should physicians use them?

Individual Retirement Accounts (IRAs) are tax-advantaged savings vehicles that fall into two primary categories: Traditional IRAs and Roth IRAs.

• Traditional IRAs: A Traditional IRA lets you deduct contributions from your taxable income in the year you make them, providing immediate tax savings. Your investments then grow tax-deferred, and you pay ordinary income taxes on withdrawals in retirement.
• Roth IRAs: A Roth IRA uses after-tax contributions, meaning there’s no immediate tax break. However, all qualified withdrawals—including both contributions and earnings—are tax-free in retirement. Compared to 401(k)s, Roth IRAs offer more investment options.

The annual contribution limit of both vehicles—set by the IRS—is $7,000 for those under 50 and $8,000 for those 50 or older.

4 principles for doctor retirement planning

A sound retirement plan for doctors relies on tried-and-true principles. Let’s consider four key principles of long-term financial planning:

1. Follow a budget

Don’t overlook the obvious. Create a written or digital budget that outlines exactly how much you aim to save, spend and even give in a certain period.

If you’re searching for some structure, the 50-30-20 budgeting rule dedicates 50% of your after-tax income to needs, 30% to spending, and 20% to saving. This model is both popular simple, so use it as a jumping-off point. Every physician’s needs are different.

2. Build an emergency fund

Build an emergency fund equal to a few months (or even a year) of household living expenses. If you can place your emergency fund in a high-yield savings account with your bank, the funds are more accessible in a pinch. You can also use money market mutual funds to help the cash grow.

The priority is liquidity and relative inflation resistance. Don’t hold your emergency fund in cash, because due to inflation, a $50,000 fund today is only worth about $36,000 in 10 years.

3. Pay down debt

The majority of physicians (70%) don’t pay their debt through medical school. Most wait until later to start making deposits—or even make a plan. For many attending physicians, their prolonged education corresponds with both the deprioritization of debt repayment and the prioritization of lifestyle choices that raise expenses.

However, these factors can cause financial instability. Return to first principles: If you have debt, avoid adding more debt, like cars and additional homes. Instead, pay down all debt as a foremost budgeting priority, recognizing that being debt-free offers both peace of mind and greater investment potential.

Plus, paying large amounts each month can be psychologically taxing. Debt snowballing is one efficacious repayment strategy that aids motivation. Here’s how it works in six steps:

1. List debts by balance (smallest to largest): Ignore interest rates. Focus on organizing debts from the smallest total owed to the largest.
2. Pay minimums on all debts: Avoid penalties and maintain financial stability by meeting minimum payments across all loans.
3. Attack the smallest debt with extra payments: Allocate all additional funds (beyond minimums) to the smallest balance to eliminate it quickly.
4. Roll payments to the next debt: Once the smallest debt is paid, add its total monthly payment (minimum plus extra) to the next smallest debt’s minimum payment.
5. Repeat until debt-free: Continue the process, growing your payment “snowball” with each paid-off debt until all loans are cleared.
6. Invest aggressively once debt-free: Redirect all former debt payments into investments to maximize long-term wealth growth.

4. Invest in diversified, tax-advantaged, historically-viable assets

During pre-retirement, build a solid financial foundation and accumulate wealth. In retirement, shift your focus to principal preservation.

Building wealth

To accumulate wealth, consider these asset characteristics:

• Diversification: Invest in vehicles that spread risk across historically viable markets.
• Tax implications: Opt for vehicles that offer favorable tax retirement benefits. Consider sitting with a tax professional to understand all of your unique obligations.
• History: Prioritize vehicles that have a strong historical track record.

On this basis, physicians benefit from investing in broad-based equities through their 401(k)s. The most common, institutionally backed option is S&P 500 index funds, which track the performance of the largest U.S. companies across industries.

For example, the S&P 500 has historically averaged an approximate 10% APY, and the average physician’s salary is $215,557. A physician investing the “gold standard” 15% in an S&P 500 index fund through their 401(k) over 30 years would retire with $5.3 million.

Maintaining wealth

To maintain wealth, continue to prioritize diversification, tax favorability, and historical performance. But shift your focus from high-yield assets to a mix of fixed-income vehicles and conservative, inflation-resistant holdings:

• Fixed income assets: These include annuities, Certificates of Deposits (CDS), and treasury bonds. Remember: In return for retirement income security, fixed-income asset providers generally require you to lock in your funds for a set period and charge fees for early withdrawals.
• Conservative holdings: To sustain healthy annual withdrawals without eroding principal, invest in historically inflation-protected assets. While some retirees hold broad-based equities through retirement, others prefer real estate, precious metals and other inflation-resistant holdings.

Learn from the largest online community of physicians

A Sermo poll found that over half of respondents (57%) have a financial plan in place, with 19% saying they’ve started thinking about it. If you’re like the 24% who said no or the segment ready to build out a plan, we have got tips for you.

Doctors face unique personal financial hurdles. That’s why learning how the broader medical community tackles these challenges is helpful.

Sermo is a medical social network with over 1.5 million fully verified healthcare professionals across 150 countries. Every day, thousands of Sermo members log on to exchange knowledge and problem-solve together—whether you’re focused on patient cases or budgeting advice.

Join the Sermo community today.