The best accounts to invest in are generally those with the lowest fees and taxes as those are an investor's greatest enemies. A typical doctor may have access to some or all of the following tax-protected accounts:
- Retirement
- 401(k), 403(b), 457(b), 401(a), Profit-sharing plan, Defined Benefit/Cash Balance Plan,
- Individual 401(k), SEP-IRA, SIMPLE-IRA, traditional IRA
- Roth 401(k), Roth 403(b), Roth 457(b), Roth IRA
- Taxable (i.e. non-qualified) account
- Education
- 529
- Coverdell Education Savings Account
- Taxable account
- Healthcare
- Health Savings Account
- Taxable account
- General Investing
- Taxable investing account
An employee ought to become an expert in the accounts his employer offers. The self-employed physician will generally want to use an individual 401(k). Most doctors will want to use a Backdoor Roth IRA. Those who are using a High Deductible Health Plan should take advantage of a Health Savings Account, a triple tax-free Stealth IRA. 529s are generally superior to an ESA due to their higher contribution limits and potential state tax breaks. If you have maxed out your available accounts and wish to invest more, you can invest an unlimited amount in a taxable account, which despite its name generally offers superior risk/return characteristics to many financial products such as cash value life insurance and annuities.
Recommended Reading:
Comparing 14 Types of Retirement Accounts
Best Retirement Accounts for Independent Contractors
