For physicians, dentists, and other healthcare practice owners, a retirement plan is more than an employee benefit. It is part of the practice’s broader financial strategy.
The right plan can help owners build long term wealth, reduce current taxable income, recruit and retain team members, and strengthen the overall compensation package. But the best option depends on the practice itself, including size, cash flow, ownership structure, employee demographics, and long term goals.
What Retirement Plan Options Should Healthcare Practices Consider?
Healthcare and dental practices may have several options, depending on their structure and goals.
A solo practitioner or small practice may consider a SEP IRA, SIMPLE IRA, or solo 401(k), depending on eligibility, contribution goals, and administrative preferences.
Larger practices, or practices with stronger and more predictable cash flow, may want to evaluate a traditional 401(k), safe harbor 401(k), profit sharing plan, defined benefit plan, or cash balance plan.
Each option comes with different contribution limits, employer funding requirements, testing rules, administrative responsibilities, and costs. The right plan should be selected with both tax planning and practice operations in mind.
How Much Does the Owner Want to Contribute?
For many practice owners, the conversation starts with a practical question:
How much do I want to contribute for myself, and how much am I willing or required to contribute for my employees?
Plans that allow higher owner contributions may also require meaningful employee contributions or more complex compliance testing. Simpler plans may be easier and less expensive to administer, but they may not allow the level of tax deferred savings the owner is seeking.
This balance is especially important in practices with a mix of owners, associate providers, hygienists, assistants, administrative staff, and other team members.
How Does the Plan Fit the Practice?
A retirement plan should support the practice, not create unnecessary strain.
Before choosing a plan, owners should consider:
- How predictable is the practice’s cash flow?
- How many employees are eligible to participate?
- What level of employer contribution is sustainable?
- Are the owners trying to maximize tax deferred savings?
- Will the plan help with recruiting and retention?
- How much administrative complexity is the practice prepared to manage?
These questions help narrow the options and avoid choosing a plan that looks attractive on paper but does not fit the practice’s financial reality.
Why Review the Plan With Your Advisory Team?
Retirement plan selection affects tax planning, employee benefits, cash flow, compliance, and long term wealth accumulation. It should not be treated as a standalone decision.
Practice owners should review their options with their YHB advisor, financial advisor, and retirement plan administrator before selecting or changing a plan. Each advisor brings a different lens, and the strongest plan design usually comes from aligning tax strategy, investment planning, employee benefit goals, and operational capacity.
A well designed retirement plan can help reduce taxes, reward your team, and support the long term financial future of the practice. The key is choosing a plan that fits where the practice is today and where the owner wants it to go next.
About the Author
Justin Bryan, CPA, is a Principal at YHB who advises healthcare practice owners and prospective buyers on tax planning, practice acquisitions, cash flow considerations, and long-term financial strategy.
