Retirement Savings Options for Solo and Relief Veterinarians

Retirement Savings Options for Solo and Relief Veterinarians

February 07, 2023

As a solo-veterinarian or relief veterinarian, retirement savings is a crucial aspect of your financial plan. While working in this field, you might face a challenging lifestyle, with irregular working hours, along with unpredictable income and more. However, with the right savings plan in place, you can ensure a comfortable retirement. In this article, we will discuss different retirement savings options available to you, the contribution limits, and the tax benefits based on the type of retirement account you choose.

Traditional and Roth IRAs

Roth IRAs are a popular choice for solo-veterinarians and relief veterinarians as they offer flexibility, simplicity, and tax benefits. With a Roth IRA, you contribute after-tax dollars to your account, and the money grows tax-free. The advantage of this is that when you withdraw the money during retirement, you won't have to pay any taxes on it. One disadvantage to Roth IRAs is, there are income limitations to be able to contribute to a Roth IRA.

Traditional IRAs offer tax benefits, but they work differently than Roth IRAs. With a traditional IRA, you contribute pre-tax dollars to your account, and the money grows tax-free. However, when you withdraw the money during retirement, you will have to pay taxes on it. There are also income limits and other restrictions that can affect the deductibility of contributions to a Traditional IRA.

In 2023, the contribution limit to a Traditional or Roth IRAs is $6,000, with a $1,000 catch up contribution for individuals over 50 years old.

SEP IRAs and 401(k)s

SEP IRAs are designed for self-employed individuals and small business owners, making it an excellent option for solo-veterinarians and relief veterinarians. With a SEP IRA, you can contribute up to 25% of your net income, with a maximum contribution of $66,000 for 2023. SEP IRA’s also have the advantage of being easy to set up and typically have no additional plan administrative costs or additional reporting requirements.

401(k)s are also a popular retirement savings option for employees of corporations, but self-employed individuals can also take advantage of them. With a Solo 401(k), you can contribute both as an employee and an employer, with a maximum contribution of $66,000 for 2023, plus a $6,500 catch up contribution for participants over the age of 50. In addition, as opposed to the 25% of income limitation of the SEP IRA, the 401(k) allows for up to 100% of compensation to be contributed as your employee deferral.

SEP IRAs and Traditional 401(k)s both offer tax-deferred growth, meaning that you won't have to pay taxes on the money until you withdraw it during retirement. 401(k)s can also be structured to allow for Roth contributions which provide the advantage of future tax-fee withdrawals in retirement. In addition, with the passing of SECURE Act 2.0 in 2022, there is now an option to establish a SEP Roth IRA. Currently, plan custodians are still working on the paperwork, processes and reporting to accommodate these plans.

In conclusion, there are several options for retirement savings for Solo and Relief Veterinarians. Which plan is right for you and your practice will depend on factors such as your business structure, income, and amount you are looking to save. The right plan can also change as your business changes. It is recommended that you visit with your CPA and/or financial professional to determine which plan is right for you.