As a financial advisor who works exclusively with physicians, I’m always on the lookout for new ways to help doctors build long-term wealth. That’s why I’m excited to share a retirement savings option that’s been available since SECURE 2.0 took effect in 2023: Roth SEP IRAs.
This option could be especially beneficial for physicians who are primarily W-2 employees at a hospital or practice, but who also earn some additional 1099 income on the side. If that describes your situation, you’ll want to pay close attention, as this could be a game-changer for your retirement planning strategy.
What’s a Roth SEP IRA?
First, let’s break down what this account type means. SEP stands for Simplified Employee Pension, which is a type of retirement account designed for self-employed individuals or small business owners. Traditionally, SEP IRAs have only been available as traditional (pre-tax) accounts. The “Roth” designation means that contributions are made with after-tax dollars, but the growth and withdrawals in retirement are tax-free.
Why This Matters for Physicians
Many of you are already maxing out your employer-sponsored retirement plans like 401(k)s, 403(b)s, or 457(b)s. But what about that extra income from moonlighting, consulting, or other 1099 work? That’s where a Roth SEP IRA can come in handy.
Instead of just putting that extra $10,000, $20,000, or $30,000 into a regular taxable brokerage account, you’ll have the option to funnel it into a Roth SEP IRA. With the 2026 SEP IRA contribution limit set at $72,000 (capped at 25% of compensation), this means you can potentially save substantially more for retirement in a tax-advantaged account.
The Benefits of Going Roth
Why choose a Roth option over a traditional SEP IRA? Well, if you’re already in a high tax bracket (as many physicians are) and have been max funding your pre-tax accounts, you may be looking for some strategies for tax diversification.
A Roth SEP turns into a great option if you make too much to contribute directly to a Roth IRA, have not been contributing to a backdoor Roth IRA, or run into the pro rata rules for funding a backdoor Roth. You’ll pay taxes on the SEP Roth contributions now, but all that growth over the years will be tax-free when you withdraw it in retirement.
Plus, unlike traditional IRAs or 401(k)s, Roth accounts don’t have required minimum distributions (RMDs) during your lifetime. This gives you more flexibility in retirement planning and can be a powerful tool for leaving a tax-free inheritance to your heirs.
Flexibility in Timing
One of the great features of SEP IRAs, including this Roth version, is the flexibility in contribution timing. Unlike some other retirement accounts that require contributions by December 31st, you can actually make SEP IRA contributions for a given tax year up until your tax filing deadline. If you file for an extension, that means you could potentially make contributions all the way up to October 15th of the following year.
This flexibility can be a huge advantage for physicians who might not know their exact 1099 income until after the end of the year.
Is a Roth SEP IRA Right for You?
While this option is exciting, it’s important to remember that every physician’s financial situation is unique. Whether a Roth SEP IRA makes sense for you depends on a variety of factors, including your current tax bracket, expected future tax rates, other retirement savings, and overall financial goals.
As always, I recommend speaking with a financial advisor who specializes in working with physicians before making any major changes to your retirement savings strategy. We can help you analyze your specific situation and determine if a Roth SEP IRA aligns with your long-term financial plans.
This option represents an exciting opportunity for many physicians to potentially boost their retirement savings in a tax-advantaged way. It’s just one more tool in our toolkit to help you build the financial future you deserve after all your years of hard work and dedication to patient care.
If you’re interested in learning more, we very much encourage you to ask your CPA or schedule a free 30-minute session with GenFi founding partner Ben Yin.
Wondering whether a Roth SEP IRA actually fits your 1099 income picture — and how it compares to a Solo 401(k) or a backdoor Roth in your situation? Ben Yin offers a free, no-obligation 30-minute “Zero Call” to talk it through. No slides, no sales pitch — just a focused conversation about whether the strategy is right for you. Book your Zero Call here.
