The most underrated job benefit for employed physicians is 401k matching up to the annual maximum of $66,000.
Employee vs Employer Contributions
Many employers offer some sort of retirement benefits, and most physicians should participate in the retirement plan their employer offers.
But not all plans are created equal.
Many job ads will advertise "401k matching", but there are massive differences between how much each employer matches.
On the low end, some employers don't provide any matching. You put in a maximum of $22,500 per year, and let it compound.
Many jobs match 3-5%. This is a nice perk, but leaves something to be desired.
The best possible scenario: You put in the individual maximum of $22,500, your employer contributes $43,500, which adds up to the cumulative maximum of $66,000.
Match Math
Let's say an EM physician starts working at 35 years old, and works for 20 years before retiring.
If they work at a job with no match, they can contribute $22,500/year. Assuming an 8% return, they'll end up with slightly over $1.1 million dollars in their retirement account.
This may seem like a lot, but it's probably not enough to retire. At a 4% withdrawal rate, they can only spend $45,000/year. This physician is going to have to save a large sum of money in addition to this.
Now let's consider a scenario in which the physician contributes $22,500/year, and their employer contributes $43,500/year, for a total of $66,000/year.
In this scenario, the physician ends up with over $3 million dollars. At a 4% withdrawal rate, they can spend $120,000/year. That provides a comfortable lifestyle in most parts of the country. Depending on their goals and budget, there's a chance this physician doesn't have to save any additional money at all to fund their retirement.
It's pretty obvious that a bigger match is better. You don't need to read a blog post to understand that. But the thing that is non-obvious is how big of a difference it makes.
Here's the bizarre thing: for how important this benefit is, it's often not even listed in job postings. Even jobs that offer the full match (allowing you to hit the maximum $66,000 contribution) often don't advertise it in the job posting.
Nomenclature
One of the confusing things about the $66,000/year match is that there's no single name for it.
Different people call it different things. I've seen it called all of the below (some of which are not even correct, they refer to something else entirely):
- Full Employer Matching
- Super Match
- Profit Matching
- Safe Harbor
Summary
Contributing $66,000/year to your 401k will supercharge your retirement investments.
It's an extremely valuable benefit that only a few employers offer.
It's worth looking for jobs that offer this, but the only way to know is to ask.
Given the multiple confusing descriptions of various 401k match options, this is the easiest way to ask: "If I contribute $22,500, how much will the company match?"
Ideally the answer is $43,500, for a total of $66,000/year.
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