Maximizing Your 401(k) Contributions as a Healthcare Professional Approaching Year-End

As a busy physician, dentist, or healthcare practitioner, you dedicate countless hours to patient care—and often, planning your personal finances takes a back seat. Yet optimizing your retirement savings before year-end can have a profound impact on your long-term wealth and tax position. This comprehensive guide will walk you through each step of assessing your 401(k) contributions, calculating the precise payroll deduction needed, and avoiding costly over-contribution errors. By acting now, you can position yourself to reach the annual contribution limit, leverage tax benefits, and stay on track for a comfortable retirement.

1. Understand Your 401(k) Contribution Limits for 2025

Each year, the IRS sets maximum limits on elective deferrals to workplace retirement plans. For 2025, the individual 401(k) contribution limit is $23,500. If you’re age 50 or older, you can make an additional catch-up contribution of $7,500, bringing your total possible deferral to $31,000.

• Under Age 50: $23,500 maximum deferral.
• Age 50+ Catch-Up: Additional $7,500 permitted.

Physicians and dentists often see fluctuating paychecks due to bonuses, locum tenens contracts, or varying on-call schedules. That makes it critical to track year-to-date contributions and adjust mid-year if necessary.

2. Assess Your Year-to-Date Contributions

Before October rolls around, log in to your 401(k) portal or review recent pay stubs to determine how much you’ve already contributed. For example, if you’ve contributed $10,000 by September 30, you have $13,500 remaining toward the $23,500 limit.

Steps to follow:

• Access your online retirement account or payroll portal.
• Sum your deferrals through your most recent paycheck.
• Note the remaining allowance (limit minus year-to-date contributions).

Having this figure in hand allows you to calculate exactly how much to direct from each paycheck in the final quarter.

3. Calculating Your Required Paycheck Deferrals

Once you know the remaining balance, determine how many paychecks you expect between November 1 and December 31. If you receive biweekly pay, that’s typically four paychecks. Dividing the remaining allowance by four gives the dollar amount you need to defer each period.

4. Navigating Employer Plan Rules and Deadlines

Different employers impose various processing windows for contribution changes. Some require notice at least two pay periods before the effective date. To avoid surprises:

• Contact HR or your plan administrator by mid-October.
• Confirm the effective date for your new deferral election.
• Submit the required paperwork or portal entries promptly.

If the effective date is later than November 1, reduce the number of paychecks used in your calculation accordingly.

5. Strategies to Avoid Over-Contribution

Overstepping the annual limit triggers complex corrections and may create unexpected tax bills. Consider these precautions:

• Conservative Buffer: Aim for slightly under the limit (e.g., leave $100–$200 unused) to account for payroll timing variances.
• Regular Check-Ins: Monitor your contributions after each pay period.
• Plan for Catch-Up: If you’re 50+, track your catch-up contributions separately.

By building in a small cushion, you reduce the risk of excess deferrals that require reclassification and potential taxable income.

6. Fine-Tuning Your Investment Allocation

Maxing out your contributions is only half the battle—allocating those dollars effectively is equally important. As a healthcare professional, your schedule may make frequent rebalancing difficult. Consider these principles:

• Diversification: Spread contributions across equity funds, bond funds, and stable value options.
• Risk Tolerance: Younger physicians may favor a higher equity tilt; dentists approaching retirement may prefer conservative allocations.
• Lifecycle Funds: Target-date funds offer automatic rebalancing aligned with your expected retirement year.

Review your fund lineup on an annual basis and adjust as your practice income, family situation, or risk tolerance evolves.

7. Tax Implications and Benefits

Every dollar you defer pre-tax reduces your current taxable income. For a high-earning physician in the 32% federal bracket, deferring $23,500 could lower federal taxes by $7,520, plus state tax savings where applicable.

Additional advantages:

• Tax-Deferred Growth: Investments compound without current tax drag.
• Potential Employer Match: If you start contributing more now, you’ll capture any matching contributions your employer offers on deferrals up to a cap.

Consult your tax advisor to understand how increased deferrals interact with other year-end planning, such as charitable giving or estimated tax payments.

8. Common Pitfalls and How to Avoid Them

Even experienced clinicians occasionally run into issues when making late-year contribution adjustments:

• Missed Effective Dates: Submitting elections late can push your change into January of the following year.
• Incorrect Percentage: Rounding errors may leave you underfunded or create an excess.
• Overlooking Catch-Up: Failing to designate age-50+ contributions correctly.

Minimize mistakes with a step-by-step checklist and periodic reviews.

9. How Mainstay Capital Can Support You

At Mainstay Capital, we specialize in helping busy healthcare professionals optimize their retirement strategies. Our holistic approach covers:

• Our Process: Personalized planning tailored to your career stage and risk profile.
• Services: From tax-efficient savings strategies to portfolio management.
• About Us: Meet the team of CFP® professionals who understand the unique financial challenges of physicians and dentists.

Ready to take control of your retirement savings? Schedule a complimentary consultation today.