What Is a Defined Benefit Plan for Physicians (And Should You Have One)?

Most physicians I work with are doing the right things. They're maxing out their 401(k) or 403(b). Some are doing the backdoor Roth IRA. A few are putting money into their HSA.

And then I ask them about their defined benefit plan.

Nine times out of ten, I get a blank stare.

That's a problem, because a defined benefit plan is the most powerful tax shelter available to high-income physicians in 2026. The contribution limit this year is $290,000. That's not a typo. Two hundred and ninety thousand dollars, per year, tax-deferred. Compare that to the $23,000 cap on a standard 401(k) and you start to understand why this matters.

The doctors who know about this are saving hundreds of thousands in taxes. The ones who don't are leaving a lot of money on the table.

How Do Physicians Build Wealth Differently?

The honest answer is that most physicians don't build wealth differently. They build it slower.

You come out of residency with $200K to $400K in student debt, a decade of earning nothing behind you, and a high income starting in your mid-30s at the earliest. You have 25 to 30 working years to build what someone who started saving at 22 built in 40.

So physician financial planning is really about two things: catching up fast and keeping as much of your income as possible out of the government's hands.

That's exactly where the defined benefit plan comes in. According to the IRS, a defined benefit plan can allow annual contributions far beyond what any other retirement account allows, especially for physicians who are older and have high incomes. The reason: the plan is designed to fund a specific payout at retirement, and the older you are, the more you have to contribute each year to get there.

That's actually an advantage for attending physicians in their 40s and 50s. The contribution limit goes up with age.

What Taxes Affect Doctors Most?

If you're an attending physician making $300,000 to $500,000 a year, federal income tax alone hits you at 35% to 37%. Add state income tax (up to 13.3% in California, around 10% in New York), and you're keeping maybe 50 cents on every dollar you earn.

The TCJA extension that passed recently locked in the 37% federal rate permanently, so it's not getting worse. But it's also not going down.

The only legal way to reduce what you owe is to reduce your taxable income. Retirement contributions do exactly that. Every dollar you put into a defined benefit plan is a dollar that doesn't get taxed this year.

For a physician in the 37% federal bracket plus a 9% state, a $200,000 contribution to a defined benefit plan could save $92,000 in taxes in a single year. That's not a small number.

Who Actually Qualifies for a Defined Benefit Plan?

This is the part most people don't know. Defined benefit plans aren't available to everyone. You need to be self-employed or have a business with no full-time employees, or at most a few.

That means the ideal candidates are:

• Physicians in solo private practice
• Locum tenens physicians working as independent contractors (1099 income)
• Physicians with a part-time side practice alongside their hospital employment
• Physicians who own a small medical group with no staff on W-2 payroll

If you're a hospital employee with a W-2 and no self-employment income, this probably isn't the move for you. But if you have any self-employment income at all, even from a side practice or consulting work, you might be able to fund a small defined benefit plan with that income.

It's worth having a conversation with a CPA or financial advisor who specializes in physician finances before you assume it doesn't apply to you.

Why Do Many Doctors Go Broke?

I know that sounds extreme, but I've seen it. Physicians making $350,000 a year, deep in debt, no retirement savings, stressed out of their minds.

The pattern is almost always the same.

The income shows up, the lifestyle inflates to match it, the taxes come out, and what's left isn't enough to actually build wealth. You can read more about how this plays out in the 5 Money Mistakes Early-Career Attending Physicians Make.

The doctors who end up in that position aren't irresponsible people. They just never had a plan. They did what felt natural: earned more, spent more, and figured saving would happen automatically.

It doesn't happen automatically.

The defined benefit plan forces the issue. Once you set one up, you're legally required to fund it annually. That obligation is a feature, not a bug. It takes the decision out of your hands and makes saving non-negotiable.

What Is the Best Retirement Plan for Physicians?

There's no single right answer, because it depends on your situation. But here's how I think about it.

If you're a hospital employee with no self-employment income, your retirement stack should look like this:

1. Max out your 403(b) or 401(k) first ($23,000 in 2026)
2. Do the backdoor Roth IRA ($7,000 in 2026)
3. Max out your HSA if you have a high-deductible health plan ($4,300 individual, $8,550 family)

If you have self-employment income, add a defined benefit plan on top of that. You could be sheltering $200,000 to $290,000 before the above.

The question isn't whether a defined benefit plan is better than a 401(k). It's whether you're leaving money on the table by only using a 401(k).

For most self-employed physicians over 45, the answer is yes.

How Do You Actually Set One Up?

Setting up a defined benefit plan is more involved than opening a Roth IRA. You'll need a third-party administrator (a TPA) to create the plan document and run actuarial calculations each year to determine your required contribution. Costs typically run $1,000 to $2,500 per year in administration fees.

That might sound like a lot. It isn't when you're saving $80,000 to $100,000 or more in taxes.

You'll also need to fund the plan from a business bank account, which means you need a formal business entity (LLC, S-corp, or sole proprietorship with an EIN) generating the self-employment income.

If you already have that structure and you're not using a defined benefit plan, talk to a CPA who has experience with physician practices. Not a generalist. Someone who has actually set these up for doctors before.

Frequently Asked Questions

What is a defined benefit plan for physicians? A defined benefit plan is a type of retirement plan where you commit to paying yourself a specific monthly benefit at retirement. Because the benefit is defined in advance, the IRS allows very large annual contributions to fund it, up to $290,000 per year in 2026 depending on your age and income. It is the highest-limit retirement account available to self-employed individuals.

How much can a physician contribute to a defined benefit plan? The maximum benefit allowed under a defined benefit plan in 2026 is $275,000 per year at retirement. To fund that benefit, depending on your age, you may be able to contribute $100,000 to $290,000 or more per year. Your exact contribution is calculated by an actuary based on your age, income, and target retirement benefit.

Can a physician have both a 401(k) and a defined benefit plan? Yes. Many self-employed physicians maintain a solo 401(k) alongside a defined benefit plan. The two plans work together and can significantly increase total tax-deferred savings. A CPA or financial advisor can help structure this correctly to avoid IRS issues.

Is a defined benefit plan right for a doctor just starting out? Probably not in the first few years. Defined benefit plans require annual funding, which can be a strain early in your career when you're paying down debt. They tend to make the most sense for physicians in their 40s and 50s with strong, consistent self-employment income and a desire to maximize retirement savings quickly.

What happens if I can't fund the plan one year? This is the main risk. Unlike a 401(k) where you can contribute nothing in a bad year, a defined benefit plan has a required minimum contribution each year. If you miss it, there are penalties. That's why these plans work best for physicians with stable, predictable self-employment income.

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The defined benefit plan isn't for everyone. But for the right physician, it's one of the most powerful tools in the entire tax code. If you have self-employment income and you're not using one, it's worth at least running the numbers.

You might be surprised what you find.

Sources:

• IRS Publication 560 (Retirement Plans for Small Business), 2026
• IRS Rev. Proc. 2025-40 (2026 defined benefit limit: $275,000 annual benefit / up to $290,000+ contribution depending on actuarial assumptions)
• AAMC Physician Workforce Reports (physician income context)