401K & solo 401K


  • Have adequate money at retirement.

  • Do some tax savings.

  • Get free extra money from your employer, based on how they match your contributions.

  • In general, a good monthly savings habit.


  • 401K is an investment plan between employee & employer.

  • Employee agrees to have a certain % (there is max limit set by IRS) of their money taken out of each paycheck.

  • Employer also puts in certain % and match the employee contributions. (How much do they match is something you have to ascertain during job interview and signing your job contract).

  • Investments are usually in stock market, mutual funds, bonds etc.


  • Traditional 401K: no tax now (ie money goes to investment pre-tax). However, you will pay tax at retirement when you withdraw the money.

  • Guess it’s beneficial if your earning potential remains the same or decreases as you age, and you might fall under a lower tax bracket at retirement compared to current tax bracket.

  • Roth-401K: taxed now. Or, money goes into 401K investment account after paying taxes due now.

  • Beneficial if your career is such that has potential to earn more as you age (typical for most doctors). So, pay taxes now (you might be in a lower bracket for few years now) and withdraw money tax-free at retirement.


  • Max amount that an employee or employer can contribute is adjusted periodically to account for inflation.

  • 2024: Employee limit: $23,000. Employer limit: 25% of employee’s annual salary. Total cannot exceed 69,000 (for those age<50).

Solo 401K

  • Imagine a situation if you are both employer and employee!

  • I have an LLC, and 50% of my annual salary is paid to my LLC. Later, I could have all 100% of my pay to go to my LLC.

  • Now, as an employee (of one’s own LLC) you can elect to have 23,000 put in your 401K; and as the employer, you can put 25% to the same 401K. However, the total cannot exceed 69,000.

  • As most likely earning potential might increase in the future, better to do Roth 401K, pay taxes now, save-invest, and withdraw money tax-free at retirement.

  • Withdrawal cannot be made before 59.5 years of age (or in cases of trigger events, such as death, disability etc., but have to pay penalty).