Emergency Medicine Retirement

The solo 401(k): one physician, both hats

A one participant 401(k) plan is built for exactly this pattern: one physician, contractor income, and no employees (IRS). Its advantage is structural. You contribute in both capacities at once. As the employee, you defer up to $24,500 in 2026, pre tax or Roth.

As your own employer, the plan adds a profit sharing contribution of up to 25 percent of compensation, which for a self employed physician computes to about 20 percent of net self employment earnings after the statutory adjustments. The two pieces together run to the overall 2026 limit of $72,000 (IRS Notice 2025-67). All of the 2026 limits on this page come from that notice and from IRS Revenue Procedure 2025-19 for the health savings account figures.

The arithmetic at emergency income shows why this account anchors the contractor build. On $300,000 of net self employment earnings, the employer side alone reaches about $60,000, because 20 percent of $300,000 is $60,000, and the total limit binds first at $72,000 once the $24,500 deferral is added. A spouse working in the practice can add a second set of contributions on their own compensation, which is how two physician households push the total well past the ceiling of one plan.

Three operating rules keep the account clean: the plan must exist and the deferral election be made inside the tax year, even when the deposit lands later. An outside W2 job with its own 401(k) shares the same personal $24,500 deferral limit across both plans, and once plan assets cross the reporting threshold the annual filing is due. The Roth decision inside the plan follows the bracket of the household now against its bracket later, and the tax efficiency ladder is where that comparison belongs. The contractor setup around the account is priced on the W2 or 1099 page.

The cash balance layer

Above the solo 401(k) sits the defined benefit layer, and it belongs to the peak income years of an established contractor. A cash balance plan is a defined benefit plan wearing an account balance: the employer, which is you, commits to a contribution formula, an actuary certifies the amounts, and the contributions are deductible business expenses.

Because the benefit is defined rather than capped by the $72,000 additions limit, a physician in the late forties or fifties with high contractor income can shelter substantially more per year than any defined contribution plan allows, which makes the plan the standard second layer for established 1099 emergency physicians whose taxable income is the problem they are solving. The bank works the decision in the cash balance plan question for established physicians, and the established guide carries the stage where it belongs.

The trade is commitment. A defined benefit plan is a promise with actuarial funding behind it, designed to run for years, not to be opened in one fat year and closed in the next. The contributions are expected in the lean year too, and shutting the plan down early carries real friction. It also carries administration cost and annual actuarial work. The honest summary: the solo 401(k) is for every career contractor. The cash balance layer is for the established contractor with a multi year runway. Price it with an actuary and a CPA together, in that order.

The S corporation question

Every contractor eventually hears the pitch, and the order of questions matters: state law first, entity second, election last. The pitch is to elect S corporation status, pay yourself a salary, take the rest as distributions, and save the self employment tax on the distribution slice. The mechanics are real, and so are the limits.

The entity that employs or contracts a practicing physician is regulated by the rules of the state for professional practice: many states require physicians to practice through a professional corporation, a professional limited liability company, or a professional association, and some states bar an ordinary limited liability company from rendering medical services at all.

An S election is a tax layer that sits on top of an eligible entity (IRS, S Corporations). It is not itself an entity, and it cannot cure an entity your state does not allow to practice medicine. Entity first, under the law of your state, with counsel. Election second, if the math earns it.

The math, once the entity is right, runs like this. The saving is the 15.3 percent self employment tax, which is 12.4 percent Social Security to the wage base plus 2.9 percent Medicare (IRS), avoided on the distribution slice, and at high incomes the Social Security piece is already maxed on the salary, so the real saving concentrates in the Medicare slice.

Against it stand the costs: a salary that must be reasonable for the work, and the reasonable salary of a full time emergency physician is a large number the IRS is entitled to test. Payroll taxes and filings on that salary. A second tax return. Taxes or fees at the state level in some states, and a retirement wrinkle, because employer contributions to a solo 401(k) key off salary in an S corporation structure rather than total earnings, which can shrink the shelter the election was meant to grow.

At moderate contractor income the costs usually eat the saving. At sustained high income with a defensible salary well below total earnings, the election can pay. It is a computation for your CPA on your actual numbers, and it is the last optimization in this stack, not the first. The bank prices the election in the S corporation question for established 1099 physicians.

The employed parallel

Hospital employed and academic emergency physicians build from a menu instead of a blank page, and the funding ladder keeps the same order as the contractor stack. Capture the full employer match first, because it is a guaranteed return no contractor gets. Run the backdoor Roth IRA for each spouse, $7,500 of space each per year (IRS Notice 2025-67).

Fill the health savings account where the plan qualifies, $4,400 for self only coverage or $8,750 for family coverage in 2026 (IRS Revenue Procedure 2025-19), then the 403(b) or 401(k) to $24,500. A governmental 457(b), offered by public hospitals and public university systems, carries its own separate $24,500 limit and no 10 percent early withdrawal penalty after separation from service (IRS), which makes it the most underused account in this specialty and the natural bridge account for an early exit.

The stacking of the two plans at one hospital job is worked in the 403(b) and 457(b) stacking question. A nongovernmental 457(b) at a nonprofit system is a different animal, an unsecured promise of the employer, and it gets funded late and cautiously. The mega backdoor Roth, where the plan allows after tax contributions with conversion, closes the workplace tier, and everything past the menu goes to taxable alongside written goals.

After age 50 the menu gains catch up contributions inside the same plans. This page states the mechanism without a dollar figure: the catch up raises the elective deferral limit for older physicians inside a 401(k), a 403(b), and a governmental 457(b), and the bank works how the pieces stack in the catch up stacking question after 50. The stacking order does not change after 50. The ceilings rise, and a household already filling each account in order simply fills larger versions of the same accounts.

The funding order at each stage

The waterfall is the same at every stage, and retirement sits inside it rather than above it. The order runs: match, one month of reserves, credit cards, coverage, the loan plan in parallel, backdoor Roth, max retirement, more reserves, debt above 7 percent, the finished reserve, then taxable.

Residents run the small version of the same order. A Roth IRA opened in training, worked in the resident Roth IRA question, and a starter reserve, worked in the resident cash question, are the two retirement stage moves that matter before attending income arrives, and the resident and fellow guide carries them.

New attendings run the full order for the first time, and the bank states it as a single sequence in the retirement funding order question, with the reserve sizing for attending households in the months of expenses question: six months on W2 income, up to twelve months on 1099 or sporadic income, set by employment type and never by specialty, finished before the first taxable dollar.

The three buckets hold the result at every stage: Safety Net, Wealth Engine, and Accelerator, set out on the three bucket framework page and taught on the emergency medicine hub. The accounts on this page are the Wealth Engine in its tax sheltered form. The new attending guide runs the first year the engine is built at full attending income, and this topic stays the reference for the account mechanics underneath it, whichever employer model a given year of the career uses.

Common pitfalls