Career & Finance Topic

Fund the right accounts first.

403(b), 401(k), 457(b) and 401(a) explained, the 2026 IRS limits, the new Roth catch-up rule, Roth vs pre-tax in residency, backdoor Roth and the pro-rata trap, HSAs, and why the match comes first.

Reviewed October 2026 · verify against current guidelines

Retirement · 1 of 6

Foundation before investing.

A common order of operations

  • 1. Starter emergency fund. A common rule of thumb is 3 to 6 months of essential expenses. In residency, build one month first, then grow it.
  • 2. Full employer match. Contribute at least enough to get every matching dollar.
  • 3. High-interest debt. Pay off credit cards before investing more.
  • 4. Roth IRA while your tax bracket is low.
  • 5. More workplace deferrals: 403(b), 401(k), then 457(b) if you have one.
  • 6. HSA, if you are eligible.
  • 7. Taxable brokerage account for anything beyond that.
Never leave the match — A match is an instant return no investment can promise. Your own deferrals are always 100% yours. Employer money may vest over time, up to a 3-year cliff or a 6-year graded schedule. Know your schedule before you change jobs.

Insure first

Disability and term life insurance protect your future paychecks, which are your largest asset. See our card Insure your income first.

Retirement · 2 of 6

Know your plan's letters.

Workplace plans

403(b)Offered by 501(c)(3) nonprofits and public schools, including many academic hospitals. Pre-tax and often Roth deferrals.
401(k)Offered by for-profit employers and some nonprofits. Shares one deferral limit with your 403(b).
Governmental 457(b)Offered by state and local government employers. Has its own deferral limit, on top of a 403(b) or 401(k). The IRS says it shares many features with a 401(k), including age-50 catch-up, and the plan may offer Roth.
Non-governmental 457(b)Offered by tax-exempt employers. Also has a separate deferral limit, but the money remains the employer's property and is available to its general creditors. Limited to a select group of management or highly paid employees. No age-50 catch-up.
401(a)An employer-designed plan, often used for employer contributions or required employee contributions. Counts toward the total-additions limit, not your deferral limit.
Non-governmental 457(b) risk — In litigation or bankruptcy you stand behind the employer's general creditors. Before deferring large sums, weigh the employer's finances and the plan's distribution rules.
TSP Thrift Savings Plan (federal employees)Deferral salary you elect to contribute, pre-tax or RothVesting when employer contributions become yours
Retirement · 3 of 6

The 2026 limits.

IRS limits for tax year 2026

Elective deferrals: 401(k), 403(b), governmental 457(b), TSP$24,500 (up from $23,500). One limit per person across all 401(k) and 403(b) plans.
457(b)A separate $24,500 that stacks on top of the 401(k)/403(b) limit.
Age 50+ catch-up$8,000, for $32,500 total.
Age 60–63 catch-up (SECURE 2.0)$11,250 instead of $8,000, if the plan allows it.
Total annual additions, 415(c)$72,000 (employee plus employer, catch-ups excluded).
Compensation limit, 401(a)(17)$360,000.
IRA (traditional + Roth combined)$7,500; age 50+ catch-up $1,100.
Roth IRA phase-out (MAGI)Single or head of household: $153,000–$168,000. Married filing jointly: $242,000–$252,000. Married filing separately: $0–$10,000.

Roth catch-up for higher earners

SECURE 2.0 requires age-50+ catch-up contributions to be made as Roth if your prior-year FICA wages from the plan's employer were over the threshold. For 2026 the test uses 2025 wages over $150,000. The IRS administrative transition ended December 31, 2025. The final regulations generally apply from 2027, and plans must make a reasonable, good-faith effort in 2026. If you're over the wage threshold and your plan has no Roth option, you can't make catch-ups.

Deadlines — Workplace deferrals must come out of a paycheck within the calendar year. IRA contributions for a tax year can be made up to that year's filing deadline, not including extensions.
Retirement · 4 of 6

Roth while you're cheap.

The bracket logic

Roth means you pay tax now, and qualified withdrawals are tax-free later. Pre-tax means you skip tax now and pay it later. In 2026, a single resident earning $68,000 who takes the $16,100 standard deduction has about $51,900 of taxable income. The 12% bracket ends at $50,400, so only the last $1,500 or so is taxed at 22%. Many attendings will be in the 24–35% brackets: the 32% bracket starts above $201,775 of taxable income for single filers and above $403,550 for married couples filing jointly, so many married attendings sit at 24%. Roth wins when today's rate is lower than the rate you expect in retirement; for most residents it is.

PSLF changes the math — Pre-tax deferrals lower your AGI, and AGI drives RAP and IBR payments. Each $1,000 deferred pre-tax trims about $60–70 a year from a RAP payment at resident incomes, or $100 under 10% IBR, on top of the tax saved. RAP rates step up by band, so getting AGI just under a $10,000 band edge lowers the rate on all of it. For example, 7% of $70,500 is $4,935 a year, while 6% of $69,900 is $4,194. Model both before choosing Roth.

Reasonable defaults

  • No PSLF, low bracket: lean Roth in the 403(b) or 401(k), plus a Roth IRA.
  • PSLF-bound: lean pre-tax in the workplace plan to cut your payments, and still fund a Roth IRA.
  • Mixing is fine. Having both kinds of money gives you tax flexibility in retirement.
Retirement · 5 of 6

Backdoor Roth, done right.

When you earn too much for a Roth IRA

Above the phase-out you can't contribute to a Roth IRA directly. Instead, make a nondeductible contribution to a traditional IRA, then convert it to a Roth IRA. You need taxable compensation (wages or self-employment income) to contribute, and the contribution shares the single $7,500 IRA limit with any Roth IRA contributions. Conversions have no income limit. Report the basis and the conversion on Form 8606.

Steps

  • Contribute up to $7,500 (2026), less any direct Roth IRA contributions, to a traditional IRA. Don't deduct it.
  • Convert to Roth soon after, so there is little growth to tax. Caution: some advisors wait a short period before converting because of step-transaction concerns. That is a professional judgment call, not IRS guidance.
  • File Form 8606 for that year. Keep the forms for life, because they prove your basis.

The pro-rata rule

The taxable share of any conversion depends on all of your traditional, SEP and SIMPLE IRA balances as of December 31 of the conversion year (Form 8606, line 6). Take $7,500 of nondeductible money and a $67,500 pre-tax rollover IRA. Only 10% of what you convert is basis, so 90% of the conversion is taxable.

Clean it up

  • Roll pre-tax IRA money into your employer's 401(k) or 403(b), if the plan accepts roll-ins, before December 31.
  • Use a solo 401(k), not a SEP-IRA, for 1099 income. A SEP-IRA counts in the pro-rata math.
  • Balances in employer plans (401(k), 403(b), 457(b)) don't count.
December 31 is the snapshot — The balance on the conversion date doesn't matter. Rolling an old 401(k) into an IRA in December can make a February conversion taxable.
Retirement · 6 of 6

HSA: if you qualify.

Health savings account, 2026

EligibilityCovered by a high-deductible health plan (HDHP) with no disqualifying other coverage.
Contribution limit$4,400 self-only; $8,750 family; an extra $1,000 at age 55 and older.
HDHP definitionDeductible of at least $1,700 self-only or $3,400 family. Out-of-pocket maximum no higher than $8,500 or $17,000.
New for 2026Bronze and catastrophic Exchange plans count as HDHPs for months after December 31, 2025 (OBBBA §71307).
Tax treatmentContributions are deductible or pre-tax, growth is untaxed, and withdrawals for qualified medical expenses are tax-free.
Check your plan — Many resident health plans are not HDHPs, and if yours isn't you can't contribute. If yours is, an HSA you invest and don't spend works as a second retirement account.
HSA health savings accountHDHP high-deductible health planMAGI modified adjusted gross incomeFICA Social Security and Medicare payroll taxesSEP Simplified Employee Pension

Educational reference only — not financial, tax or legal advice. Rules change; confirm with the official source, your plan documents, or a fee-only advisor.

Sources

Verify against current guidelines and local protocol before acting.

  1. Internal Revenue Service. 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111), November 13, 2025. irs.gov.
  2. Internal Revenue Service. Notice 2025-67: 2026 Amounts Relating to Retirement Plans and IRAs (415(c) $72,000; 401(a)(17) $360,000; Roth catch-up wage threshold $150,000).
  3. Internal Revenue Service. Treasury, IRS issue final regulations on new Roth catch-up rule (IR-2025-91), September 15, 2025.
  4. Internal Revenue Service. IRC 457(b) deferred compensation plans; Non-governmental 457(b) deferred compensation plans (page reviewed August 4, 2026). irs.gov.
  5. Internal Revenue Service. How much salary can you defer if you're eligible for more than one retirement plan?; Retirement topics: 403(b) contribution limits; Retirement topics: vesting. irs.gov.
  6. Internal Revenue Service. Instructions for Form 8606 (2025), Nondeductible IRAs: line 6 uses the value of all traditional, SEP and SIMPLE IRAs on December 31.
  7. Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements: taxable compensation requirement, combined IRA limit, conversions and contribution deadlines.
  8. Internal Revenue Service. Rev. Proc. 2025-32: 2026 tax rate tables (32% bracket begins above $201,775 single and $403,550 married filing jointly) and standard deduction ($16,100 single; $32,200 married filing jointly).
  9. Internal Revenue Service. Rev. Proc. 2025-19: 2026 HSA limits ($4,400 self-only; $8,750 family) and HDHP definitions.
  10. Internal Revenue Service. Notice 2026-5: Expanded availability of HSAs under the OBBBA (bronze and catastrophic Exchange plans treated as HDHPs for months after December 31, 2025).
  11. 26 U.S.C. 223(b)(3): additional $1,000 HSA contribution at age 55 and older.