Invest for Tax Efficiency
Baptist Health allows you to save tax-deferred nearly $50,000 in deferred dollars into a 403(b) and a 457 nonqualified plan, and up to $93,000 more in mega backdoor Roth contributions into both your 403(b) and the 401(a), where Baptist puts its matching contributions. That’s…
…a lot of jargon.
Which is why so many physicians are not fully appreciating how exciting this really is when you look at it.
Let me break it down further. All investment returns being equal, you can get richer than you would with less money than it would take otherwise if you take full advantage of these plans.
None of us were born knowing any of this, and isn’t it incredible that in 15 years or more of education and training, it is highly likely that no one ever explained any of this to you. Baptist Health not only wants to make sure you have this rare combination of savings vehicles for you to take full advantage of, but it is also partnering with Aptus Financial to make sure you really understand these accounts and know practically how to start using them right now.
“Baptist Health allows you to save tax-deferred.”
Let’s start with tax-deferred. You get to put savings into this bucket and not pay taxes on those savings. Instead, you get to pay taxes on those savings later, much later, and only when you take the money out to use it.
Yes, it’s legal! The federal government is letting Baptist Health host these buckets to incentivize you to save more than you would otherwise. And if you earn a high income, this is a huge deal.
We operate in a progressive tax system where, if you are a single filer in tax year 2026, the first $12,400 gets taxed at 10%, then $12,401-$50,400 gets taxed at 12%, and so on. You can see all the brackets here: https://taxfoundation.org/data/all/federal/2026-tax-brackets/.
If you have taxable income of $400,000 in 2026 and are a single filer, then you’re in the 35% marginal tax bracket.
That means the last dollars you make have 35 cents going to taxes. If you get to put up to $50,000 into tax-deferred savings, then someone making $400,000 a year is getting to hold on to $17,500 that would have gone “poof” into taxes. Instead, that’s more money you could put into savings and not feel any difference!
Imagine just putting $50,000 a year from your check into a taxable brokerage account. You had to pay $17,500 in taxes just to get that money out!
Think of it another way. You are getting to use the money you would have paid in taxes to save more, invest it, compound it, and then have a larger pile of money than you would have otherwise.
Sure, later, when you go to use the money in those buckets for retirement, you will pay taxes when you go to take the money out. But this time, you are exploring the bottom tax brackets, and you are withdrawing on a much larger pile of money!
Even if tax rates go up substantially, you end up wealthier with this deal.
But that’s not all of it.
A couple of years ago, Baptist Health decided to make retirement buckets even better with a maneuver called a backdoor Roth IRA.
This clever hospital plan designs allow you to contribute beyond the federal limits (in 2025, you are limited to a $23,500 contribution to a 403(b)) in after-tax contributions into two separate buckets. These contributions can then be converted into Roth contributions. While not as advantageous as the pre-tax contributions, Roth money is incredible because after you put money in that bucket, you will NEVER pay taxes on that money again. The money in a Roth can quintuple, in fact. Taxes owed? Nada.
At Baptist Health, physicians can deposit over $20,000 more in both a 403(b) after-tax account and a 401(a) after-tax account, adding over $40,000 in additional funds.
We recommend that most physicians target a ~25% savings rate, but you can calculate your ideal savings rate here, which is $100,000 a year on a $400,000 salary.
Can you believe that you can get nearly $90,000 in your work retirement plans and get that money growing and compounding for you!
As if all that wasn’t exciting enough, there is another savings bucket that you can use that has even more ridiculous jargon, but follow me here. If you opted into the High-Deductible Healthcare Plan (HDHP), then you are eligible for the Health Savings Account, or HSA. This bucket can be used just for health expenses in the near-term, or you can instead use this HSA as a retirement bucket.
Yep, you heard me right, a retirement bucket. See, the government set HSAs with no limit on how long you can hold funds in there. Unlike an FSA, which is use it or lose it, the HSA can be funded each year and continue rolling over.
We love HSAs as retirement accounts because you can fund them, tax-deferred, up to $8,550 for a family in 2025, grow that money in investments, and then use that money in retirement. As long as you use the money in retirement on health expenses, you will pay NO TAXES, no taxes on the growth in that account, and no taxes on the principal that you deposited pre-tax. This means an HSA has a TRIPLE tax advantage!
To be clear, we do not recommend opting in to an HDHP just for the use of the HSA. But if the HDHP is right for you, then consider the HSA as a retirement account strategy. Remember that you will want this money in retirement, as healthcare spending can be as high as 25% of your spending in retirement!
If so, that account gets you to the nearly entire $100,000 you would need to save if you were making $400,000 a year and were targeting a 25% savings rate.
In other words, you might spend an hour getting these buckets opened, arranging them to get funded, and then the rest is completely automated.
One caveat: the mega backdoor Roth conversion is paperwork you need to fill out a couple of times a year to make that conversion, but we are hearing rumors that Milliman will be making those conversions automatic in 2026!
So you can see the incredible power of using these tax-deferred, Roth, and HSA buckets!
Now that you see why we are so excited about the Baptist savings buckets, let’s explore the full Tax Efficient Waterfall. This is the full hierarchy of how we would prioritize your savings to get the most “bang for your buckets.”
Get your free money. Baptist matches 50% up to 8%, so the first 8% of your dollars needs to be prioritized to the 403(b). Baptist will deposit its matching dollars into a 401(a) for you. So confusing, but now you know what that bucket is for. Fun fact: Baptist Health loves retirement so much that on top of the matching dollars, every year it puts another 3% of your pay into your savings.
Pay off all your high-interest debt. If you have credit card debt, SLAY IT. Don’t use any more buckets until you pay off that debt. Why? Imagine if I came to you and said I had a guaranteed rate of return on your money of 24%. Wouldn’t you take that deal? If you carry credit card debt balances month to month, you need to take that deal and pay them off to zero before you move to another waterfall bucket. If you have student loan debt, since Baptist Health is a PSLF eligible employer, prioritize getting your loans forgiven and making whatever payment necessary to get those loans GONE. Join Baptist Health Project 120 to get on track for that here.
Build an emergency fund. While there is technically no tax efficiency in this bucket and very little return on your money (high-yield savings hover around 3.5%-4.5% right now), this account is the protective vest around your precious dollars. This money prevents you from having to raid HSA or retirement accounts if something happens. Get 3-6 months of spending in this account as quickly as possible.
Max your HSA. See above regarding the HSA. Deposit that money. Set it to invest for retirement.
Max your 403(b). This is the best official retirement plan because it is considered a qualified retirement plan. Basically, you don’t have to start taking money out of it until you turn 73! That means you can use all that time potentially to grow your money. But you can take it out as soon as age 591/2.
Max out your 457(b). Note that the 457(b) has different withdrawal rules than the 403(b) since it is not a qualified plan, and you need to make sure you understand those rules and choose a withdrawal schedule that is most tax advantageous when you separate from service. Folks at Aptus are standing by to explain how it works.
Max out your 403(b), then your 401(a) after tax contribution, and convert to a Roth IRA.
Max out a backdoor Roth IRA (tutorial here).
Max out a taxable brokerage account.
Pay off your house, even if it’s a low interest rate, and/or invest in alternatives. (Fine—if you must buy crypto or buy meme stocks, just use money you can afford to lose.)
And there you have it, the tax-efficient waterfall from Aptus Financial.
If you want to see different scenarios in action, click on any of the links below: