Smart Retirement Investing For Residents and New Attendings

Today we’re chatting about investing for retirement.

There’s a ton of information online about the topic. However, we wanted to talk about the mindset and early actions worth taking to start building your nest egg during residency, and even early attendinghood.

There’s no magic formula for this stuff.

You’ll need to set up investment and retirement accounts, automate money transfers into those accounts, pick stocks and index funds to invest in, and then let compounding do the rest. Simple, right?

Let’s dig in a little bit more about smart insights that are specific to you, an MD.

Your 403(b) is “Free” Money – Stop Leaving It Behind

A 403(b) plan is a retirement savings plan, similar to a 401(k), available to employees of public schools, tax-exempt organizations, and certain religious institutions.

In your case, if you work at a tax-exempt hospital system, your employer likely has a 403(b) retirement plan. (Definitely double check this point!).

403(b) allows eligible employees to save for retirement through tax-deferred contributions and potentially benefit from employer matching contributions.

Tax Advantages:

Contributions, i.e. the money you put in, are typically made on a pre-tax basis, meaning they can reduce current taxable income. Simply put, the more money you put into the 403(b), the less money you took home. This can lower your tax liability.

Earnings in your 403(b) grow tax-deferred until retirement. Some plans also offer Roth options, where contributions are made after-tax, but withdrawals in retirement are tax-free. 

Investment Options:

403(b) plans offer a variety of investment options, including mutual funds, annuities, and sometimes custodial accounts. Consult your employer’s plan to see what you can invest in!

Contribution Limits:

If you’re under 50, you can invest up to $23,500 into your account. Our audience is mainly residents and new attendings, so I won’t comment on the additions that more experience physicians are able to add.

The main point I want to make is that if your employer offers a match, you should probably take it. Some hospitals offer 3-5% matching. If you’re able to get this “free” money, you should focus on maximizing this before you start looking at your Roth IRA.

For example, if your employer matches 5% and you make $60K, they’ll throw in $3,000 a year just because you’re saving for yourself. That’s a 100% return instantly. But over a third of residents skip it entirely. Don’t be one of them.

For those feeling a little more savvy, check out Roth contributions. Roth means you pay taxes now, rather than later. You should consider a Roth 403(b) if you plan to be in a higher tax bracket during retirement.

Just know that once you’re mid-to-late attending-level and earning $300k+, that calculus might change.

The Backdoor Roth IRA - Your High-Income Escape Hatch

A Roth IRA is one of the best retirement accounts you can have.

You put in money that's already been taxed, it grows for decades, and when you retire you pull it out completely tax-free.

The problem?

Once you make more than $150k (single) or $236k (married), you can no longer contribute. As an attending, you'll blow past this limit quickly.

Enter the Backdoor Roth IRA. It's a perfectly legal workaround that lets high earners contribute to a Roth IRA anyway.

(Most resident reading this section will gloss over it because your pay is still repressed during training. I encourage you to understand the strategy anyways).

How a Backdoor Roth works:

1. Open a traditional IRA account (any broker)

2. Contribute up to $7,000 (the 2025 limit) using after-tax dollars

3. Immediately convert that money to a Roth IRA (pretty easy within modern broker platforms)

4. Pay taxes on any gains during the conversion (usually zero if you do it quickly)

5. Do it again next year! Now you’re able to take advantage of a Roth’s tax-free growth while on a higher salary

You're basically using the traditional IRA as a temporary holding spot before moving the money to the Roth IRA.

The fine print

If you already have money in other traditional IRAs, the conversion gets more complicated due to something called the "pro-rata rule."

Most residents don't have this issue, but check your accounts first.

Also, keep good records. The tax man wants to see documentation of your conversion when you file taxes.

Meme of the Week

To the good ol’ days.

Talk soon,

M&H