Dr. Amanda Okonkwo received her first attending paycheck on a Friday in late July. She sat at her kitchen table, staring at the direct deposit notification on her phone. After taxes, it was more than she’d made in 6 months as a resident.
Her phone buzzed. A text from her co-resident: “First paycheck! Looking at Teslas this weekend. Want to come?”
Amanda smiled but declined. She had different plans for Saturday: setting up her retirement accounts. Not sexy, not Instagram-worthy, but five years later, while her friend was still making car payments, Amanda had over $200,000 in retirement savings and the freedom to take a three-month sabbatical to work in an underserved clinic in Ghana.
Here’s the truth about wealth building in medicine: your income is about to get really good, but so are your temptations to spend it. The doctors who retire comfortably aren’t the ones who made the most money. They’re the ones who invested consistently from day one and avoided lifestyle inflation.
Let’s talk about how to become one of them.
Why Your First Attending Paycheck Sets the Course for Retirement
The First Question: W-2 or 1099?
Before we dive into retirement accounts, you need to understand your employment status because it dramatically affects your retirement options.
W-2 Employment means you’re a traditional employee. Your hospital or group:
- Withholds taxes from your paycheck
- Pays half of your Social Security and Medicare taxes
- Likely offers a 401(k) or 403(b) with possible matching
- Provides benefits like health insurance
1099 Independent Contractor means you’re essentially running your own mini-business:
- You pay all your own taxes (including the full Social Security and Medicare tax – FICA)
- You set up your own retirement accounts (Solo 401k or SEP IRA)
- You handle your own health insurance and benefits
- But you have higher retirement contribution limits and more flexibility
Most hospital-employed physicians are W-2. Many ER docs, anesthesiologists, and hospitalists working for contract management groups are 1099.
Check your offer letter or ask HR: “Will I be W-2 or 1099?” This determines everything that follows.
The Universal Rule: Start With the Backdoor Roth IRA
Regardless of your employment status, every new attending should set up a backdoor Roth IRA immediately. This assumes you don’t have existing pre-tax IRA balances that would trigger the pro-rata rule. Here’s why:
A Roth IRA is magical: you contribute after-tax money now, it grows tax-free, and you withdraw it tax-free in retirement. But there’s a problem: if you make over $161,000 as a single filer (or $240,000 married filing jointly), you can’t contribute directly to a Roth IRA.
Enter the backdoor: a perfectly legal workaround that lets high-income earners like you contribute to a Roth IRA anyway.
The Backdoor Roth: A Step-by-Step Guide
This sounds complicated, but it’s actually simple after the first time. Think of it like learning to intubate: awkward the first time, routine after you’ve done it a few times.
Step 1: Open Two Accounts (One-Time Setup)
- Open a Traditional IRA at a brokerage (Vanguard, Fidelity, or Schwab are popular)
- Open a Roth IRA at the same brokerage
- This takes about 20 minutes online
Step 2: Link Your Bank Account
- Connect your checking account to your brokerage
- This allows you to transfer money in and out
Step 3: Make Your Contribution
- Transfer $7,000 (the 2025 limit) to your Traditional IRA
- Important: Do not invest this money yet. Leave it in cash/money market.
Step 4: Convert to Roth (Do This Within Days)
- Log into your brokerage account
- Select “Convert Traditional IRA to Roth IRA”
- Convert the entire balance ($7,000 + any interest earned over the 2-3 days)
- This is the “backdoor” part
Step 5: Invest the Money
- Now that it’s in your Roth IRA, invest it
- Most new attendings choose a target-date fund or total stock market index fund
- Pick something and move on. Don’t overthink this.
Step 6: File Form 8606 at Tax Time
- Your tax software will guide you through this
- It tells the IRS about your non-deductible contribution and conversion
- Takes about 5 minutes
That’s it. Do steps 3-6 every January, and in 30 years, you could have over $1 million in tax-free retirement money.
The Income Limits Reality: Why You Need the Backdoor
“Wait, can’t I just contribute directly to a Roth IRA?”
Not anymore. Once you start making attending money, you’ve exceeded the income limits. That’s why the backdoor Roth is so important—it’s how high-income earners access Roth IRA benefits.
If someone tries to sell you on contributing directly to a Roth IRA, smile and nod, but know that they don’t understand physician finances. The backdoor is your friend.
For W-2 Employees: Maximize Your 403(b) or 401(k)
If you’re W-2, your employer offers either a 403(b) (common for hospitals) or 401(k) (more common in private groups). For all practical purposes, they are essentially the same with different names.
The 2025 limit: $23,500 per year
Here’s your goal: contribute the maximum to your employer retirement plan every single year. Yes, every year. No excuses, no “I’ll start next year.”
Does Your Employer Match? Some employers match your contributions, like “we’ll contribute 3% if you contribute 3%.” This is free money. Always contribute at least enough to get the full match, even before tackling high-interest debt. It’s an instant 100% return on your investment.
Pre-Tax (Traditional) vs. Roth: Which Should You Choose?
Most plans offer both options:
- Traditional/Pre-Tax: Reduces your taxable income now, but you pay taxes on withdrawals in retirement
- Roth: You pay taxes now, but all withdrawals are tax-free in retirement
For most new attendings in high tax brackets, I recommend starting with the traditional (pre-tax) option. You’re in a high tax bracket now (32-37%) and will likely be in a lower bracket in retirement. Take the tax break now. However, with contribution limits increasing, long career paths for younger attendings, and required minimum distributions – pre-tax contributions (Traditional) may not make the most financial sense. After you’ve established some basic financial stability and wealth, it’s important to go back and consider whether pre-tax vs post-tax contributions are more beneficial.
The Big Exception: If you’re married with kids and your spouse doesn’t work (or works part-time), you might be in a lower tax bracket. In that case, Roth contributions could make sense.
For 1099 Contractors: The Solo 401(k) or SEP IRA
If you’re 1099, congratulations: you have access to much higher contribution limits.
Solo 401(k): You can contribute up to $70,000 total, depending on income, through employee and employer contributions. This is your best option if you want to save aggressively.
SEP IRA: Simpler to set up and maintain than a Solo 401(k), and you can contribute up to 25% of your net self-employment income (roughly 20% of gross income), maxing out at $70,000. However, SEP IRA contributions can complicate or limit the ability to backdoor Roth. Most 1099 contractors choose the solo 401(k) plan.
Setting these up requires a bit more work (you’ll need an EIN from the IRS, which is free and takes 5 minutes online), but the tax savings are enormous.
The Killer Mistake: Lifestyle Creep
Dr. Marcus Wu made $300,000 in his first year as an attending hospitalist. He contributed the max to his 401(k) and did his backdoor Roth. By all accounts, he was doing well.
But he also upgraded his apartment ($3,200/month vs. his resident’s $1,000), bought a BMW ($750/month payment), started eating out frequently ($1,500/month), and signed up for every subscription service that caught his eye.
Five years later, despite his high income, he had barely more saved than his co-resident who made $100,000 less but kept her spending in check.
This is lifestyle creep: expenses rising to match income. It’s the number one reason physicians who make great money still feel financially stressed.
The Counter-Strategy: The One-Year Challenge
Here’s my radical suggestion: for your first year as an attending, pretend you’re still a resident (with a few reasonable upgrades).
Keep your spending to roughly $6,000-$8,000 per month total—rent, food, car, everything. It’s nowhere near what you could spend with your new income.
With a $300,000 salary, after maxing your retirement accounts and taxes, you’ll have roughly $10,000-$12,000 per month hitting your checking account. If you spend $6,000-$8,000, that leaves $2,000-$6,000 monthly for paying down debt, building your emergency fund, and starting to invest in a taxable brokerage account.
Do this for just one year. Then reassess.
I promise: by month 13, you’ll be so far ahead financially that you’ll have earned the right to upgrade your lifestyle guilt-free. That’s when you can get the nicer apartment, replace your car, or take that vacation you’ve been dreaming about.
The Real Numbers: What This Looks Like
Let’s run through a real example:
Dr. Sarah, Single, W-2 Employee, $280,000 Salary
- Backdoor Roth IRA: $7,000/year
- 403(b) contribution: $23,500/year
- Total retirement savings: $30,000/year
After 30 years at 6% annual return (conservative estimate):
- Total contribution: $900,000
- Account value: ~$2.4 million
Dr. James, Married, 1099 Contractor, $320,000 Income
- Backdoor Roth IRA: $7,000/year (him) + $7,000/year (non-working spouse) = $14,000
- Solo 401(k): $69,000/year
- Total retirement savings: $83,000/year
After 30 years at 6% annual return:
- Total contributed: $2.49 million
- Account value: ~$6.7 million
The difference? Employment structure and commitment to maxing contributions.
Your First-Month Checklist
Don’t wait. Don’t “figure it out later.” Do these five things in your first month as an attending:
Week 1:
- Review your offer letter: W-2 or 1099?
- Contact HR or your benefits administrator
- Ask: What retirement plans do you offer? Is there a match? When can I enroll?
Week 2:
- Open a Traditional IRA and Roth IRA at Vanguard, Fidelity, or Schwab
- Link your bank account
Week 3:
- Adjust your 403(b)/401(k) contributions through payroll (if W-2)
- Aim for the maximum: $23,500/year divided by number of paychecks
- Select “Traditional” or “Pre-Tax” for now
Week 4:
- Make your first backdoor Roth contribution
- Contribute $7,000 to Traditional IRA by years end
- Immediately convert contributions to Roth IRA
- Invest in a target-date fund
Week 5:
- Set a calendar reminder for January 1st next year: “Do backdoor Roth”
- Pat yourself on the back. You’re ahead of 90% of your colleagues.
The Truth About Starting Late
“But I’m 35 and just starting. Is it too late?”
No. Let me be clear: it is never too late to start investing for retirement.
A physician who starts saving at 35 and saves $30,000/year for 30 years will still accumulate over $2 million by retirement. Meanwhile, a physician who never starts will retire on Social Security alone.
The best time to start was yesterday. The second-best time is today.
Why This Matters Beyond the Numbers
Dr. Okonkwo, from our opening story, told me something interesting five years into her attending career: “I don’t think about retirement accounts as money I’m giving up. I think about them as freedom I’m building.”
She’s right. Every dollar you save in your twenties and thirties is a dollar of freedom in your forties, fifties, and beyond. Freedom to:
- Work part-time if you burn out
- Take a year off to travel or volunteer
- Say no to a toxic job
- Retire early if you want to
- Practice medicine because you love it, not because you need the paycheck
That’s what this is really about. Not spreadsheets and tax forms, but building the life you want.
You can afford it. You’re a physician. You might need to live a bit more modestly than you imagined, but you can absolutely afford to save $30,000-$80,000 per year for retirement.
Your future self is counting on you. Don’t let yourself down.
Building wealth while transitioning to attending life takes strategy and support. Our Bridge Loan program helps new physicians manage the transition period while establishing strong financial habits from day one.
