Guide to Retirement Accounts

Dr. Mike Mackney, DDS  ·  Invest with a DDS

You're probably saving for retirement.

But are you doing it correctly?

You may be putting money in the wrong account, at the wrong time, for the wrong reasons. And in 30 years, that mistake is going to have a name. It's going to be called "the $200,000 decision you made on autopilot in your 30s."

Here's what nobody explained to you when you started your job and HR handed you a benefits packet the size of a phonebook: not all retirement accounts are the same.

A 401(k) and a Roth IRA are not interchangeable.

And neither of those have the same tax benefits of a taxable brokerage account.

This is the breakdown nobody gave us in school.

Why This Actually Matters

Before we get into the accounts themselves, let's talk about why understanding this is worth your time.

Every retirement account is built around one core concept: tax-advantaged growth. The government gives you a deal, shelter your money from taxes in some way, in exchange for using that money specifically for retirement.

The difference between the accounts comes down to when you get the tax break. Some accounts give you the break now (you contribute pre-tax dollars, lowering your taxable income today). Others give you the break later (you contribute after-tax dollars, but your growth and withdrawals are completely tax-free in retirement).

That timing decision — now versus later — is the entire game. And getting it right can mean the difference of six figures over a career.

Keep that framework in your head as we go through each account. It'll make everything else click.

The 401(k) — The One Everyone Has Heard Of

If you work for a private employer — a dental group, a hospital system, a private practice — there's a good chance you've been offered a 401(k). It's the most common workplace retirement account in the country, and most people sign up for it without understanding what they actually signed up for.

Here's the simple version: a 401(k) lets you contribute money directly from your paycheck — before taxes are taken out — into an investment account. That money grows tax-deferred, meaning you don't pay taxes on the growth year after year. You only pay when you withdraw in retirement.

The story version: imagine your salary is $150,000. If you contribute $10,000 to your traditional 401(k), the IRS only sees $140,000 of income this year. You've just lowered your tax bill while building wealth at the same time. That's the deal.

One thing most people miss: many 401(k) plans now offer a Roth option inside the 401(k). Same contribution limits, same employer match eligibility — but your contributions go in after-tax and grow completely tax-free. If your employer offers this and you're early in your career, it's worth serious consideration.

The non-negotiable: if your employer offers a match, contribute enough to get every dollar of it. A 3% employer match on a $150,000 salary is $4,500 of free money per year. Leaving that on the table is the most expensive financial mistake in the room.

The 403(b) — The 401(k)'s Lesser-Known Twin

If you work for a hospital, university, nonprofit, or public school system, you've probably been offered a 403(b) instead of a 401(k). The difference in name comes from the section of the tax code that governs them — but for practical purposes, they work almost identically.

The story version: Sarah is a nurse practitioner at a nonprofit hospital. She gets offered a 403(b) at orientation and enrolls without thinking much about it. Turns out, she's using the exact same tax strategy as her friend who's a dentist at a private group with a 401(k). Different vehicle, same road.

The watch-out with 403(b)s: some plans, especially older ones, are loaded with high-fee annuity products pushed by insurance companies. Before you invest, look at the expense ratios on the funds available to you. Low-cost index funds in a 403(b) are great. A 1.5% annual fee on an annuity product will quietly drain your retirement over decades.

The Traditional IRA — The Flexible Fallback

IRA stands for Individual Retirement Account. Unlike a 401(k) or 403(b), it has nothing to do with your employer. You open it yourself, at any brokerage, and you control exactly what's in it.

The traditional IRA works like the traditional 401(k): you contribute pre-tax dollars (subject to income limits), the money grows tax-deferred, and you pay ordinary income tax when you withdraw in retirement.

The story version: Marcus is a traveling nurse who switches jobs every year. He never stays long enough to fully vest in any employer's plan. His solution? A traditional IRA he controls completely — no matter where he works, the account goes with him.

The income caveat for high earners: if you or your spouse have a workplace retirement plan, your ability to deduct traditional IRA contributions phases out above certain income levels. As a dentist or physician making $150K+, you may not get the tax deduction — which is exactly why the Roth IRA (or backdoor Roth, more on that in a moment) matters so much for healthcare workers.

The Roth IRA — The One You Should Probably Have

If I had to pick one account to explain to every healthcare worker who came to me, it would be the Roth IRA. Not because it's always the best choice — but because it's the most misunderstood and the most underused.

Here's what makes it different: you put in money you've already paid taxes on. In exchange, every dollar of growth inside that account — and every dollar you take out in retirement — is completely tax-free. Forever. No required withdrawals. No tax bill at 73. Just your money, untouched by the IRS, for as long as you want.

The story version: Two dentists graduate together at 28. Both earn $180,000. Dentist A puts $7,500 into a traditional IRA every year and saves on taxes now. Dentist B puts $7,500 into a Roth IRA every year and gets no tax break today. Fast forward 35 years. Dentist A's account has grown to $1.1 million — and every dollar they pull out will be taxed. Dentist B's account has also grown to $1.1 million — and not a single dollar of it will ever be taxed again.

That's the Roth IRA.

The Brokerage Account — No Rules, No Limits, No Excuses

Every account we've talked about so far has rules — contribution limits, income restrictions, early withdrawal penalties, required distributions. The brokerage account has almost none of that.

A taxable brokerage account is simply an investment account you open at a brokerage firm (Fidelity, Schwab, Vanguard, etc.) and fund with after-tax dollars. You can invest in stocks, ETFs, index funds, bonds — anything. You can put in as much as you want. You can take it out whenever you want.

The trade-off is taxes. There's no special tax shelter here. You pay capital gains tax on profits when you sell, and you may owe taxes on dividends each year. But compared to not investing at all, a brokerage account is still one of the best long-term wealth-building tools available — especially once you've maxed out your tax-advantaged accounts.

The story version: A physician maxes out her 401(k) and Roth IRA every year. She still has $3,000 a month she wants to invest. A brokerage account is her only option for that money — and that's perfectly fine. Long-term capital gains rates (0%, 15%, or 20%) are often lower than ordinary income tax rates. It's not as good as a Roth, but it beats leaving money in a savings account earning 0.1%.

Side-by-Side: All Five Accounts Compared

*Traditional IRA deductibility phases out at higher incomes if you have a workplace plan. ~ Roth IRA contributions (not earnings) can be withdrawn anytime. ~ Brokerage taxed at capital gains rates, not ordinary income.

So Which One Should You Use?

Here's the honest answer: probably more than one. These accounts aren't mutually exclusive. In fact, the most effective strategy for most healthcare workers involves layering them in a specific order.

If your income is too high for a direct Roth IRA contribution (above $153K single / $242K married), replace Step 2 with a Backdoor Roth IRA contribution. Same result, different path.

The Takeaway

You don't need to have it all figured out. You just need to understand the tools available to you — and start using the right ones in the right order.

The accounts exist. The tax advantages are real. The only thing standing between you and using them is knowing they're there.

Now you know.

Dr. Mike Mackney, DDS  ·  Invest with a DDS  ·  investwithadds.com
This is for educational purposes only and not personalized financial advice. Consult a CPA or financial advisor for guidance specific to your situation.