When I finished residency, retirement felt like a lifetime away. With student loans, a new attending salary, and the urge to finally enjoy life, saving for the future wasn’t my priority. But I quickly realized that ignoring my 401k meant leaving free money on the table and missing out on decades of compound growth. Many healthcare professionals ask, is 401k worth it? The truth is, it’s one of the easiest ways to build long-term wealth while lowering taxes. If you’re unsure whether to contribute, let’s break it down so you don’t regret waiting too long, like so many others do.

What Exactly Is a 401k?

A 401k is a retirement account you get through your job. You decide how much to put in, and that money gets invested. Over time, it (hopefully) grows. There are two types:

• Traditional 401k: You don’t pay taxes on the money now, but you will later.
• Roth 401k: You pay taxes now, so withdrawals in retirement are tax-free.

The best part? Many employers match a portion of what you contribute. That’s free money, and if you’re not taking advantage of it, you’re basically saying no to a raise.

Why a 401k Is (Usually) a No-Brainer

Tax Perks Right Away

With a traditional 401k, your contributions lower your taxable income, meaning you owe less in taxes now. A Roth 401k works the opposite way—you pay taxes upfront, but your money grows tax-free. Either way, the government is giving you a little boost.

Employer Match = Free Money

If your job offers a match, take it. No debate. If they match up to 5% of your salary and you make $200K, that’s an extra $10K per year just for contributing. One of my former co-residents never signed up for his hospital’s 401k. He figured he’d start ‘once things settled down.’ A few years later, we calculated how much free money he missed. It was a whopping $20,000 in matching alone. He looked like he wanted to punch a wall. If your employer offers a match, don’t be that guy. That’s the kind of math that makes saying “no” painful.

Compound Growth Is Magic

Your money doesn’t just sit there because it grows, then that growth earns more growth. It’s like a financial snowball rolling downhill, getting bigger over time. I checked my 401k balance after a few years of contributing, expecting maybe a small bump. Instead, I saw my money had grown way more than I put in. It felt like free money. That’s when I finally got why people say compound interest is the ‘eighth wonder of the world.’ Even small contributions add up in ways that surprise people.

Lawsuit Protection

Healthcare workers worry about getting sued (understandably). The good news? Your 401k is usually shielded from creditors. That’s one less thing to stress about.

When a 401k Might Not Be the Best Choice

Is 401k worth it? Absolutely but it isn’t perfect. There are some downsides.

Limited Investment Options

You’re stuck with the funds your employer offers, and some plans have high fees or underperforming investments. If your options aren’t great, your returns won’t be either.

Hard to Touch Before Retirement

Need to pull money out before age 59½? Expect taxes plus a 10% penalty (unless you qualify for an exception). A 401k is not your emergency fund.

Taxes Down the Road

With a traditional 401k, you’ll owe taxes on withdrawals. If tax rates go up, or you’re in a high tax bracket later, you might pay more than you expected.

How It Compares to Other Options

A 401k isn’t your only way to save for retirement. Depending on your situation, you might want to mix things up.

• IRA: More investment choices but lower contribution limits.
• Brokerage Account: No tax perks, but total freedom over how and when you use the money.
• HSA: If you have a high-deductible health plan, this is a sneaky-good retirement tool. Tax-free going in, tax-free growing, and tax-free for medical expenses.

How to Get the Most Out of Your 401k

• Contribute at least enough to get the full match. Seriously, don’t leave free money on the table.
• If you can, max it out. The 2025 limit is $23,500 ($31,000 if you’re over 50).
• Look at a Roth IRA too. If your income is too high, a backdoor Roth might be an option.
• Keep an eye on fees. If your plan has expensive funds, consider rolling it into an IRA when you change jobs.

Bottom Line

So is 401k worth it? For most healthcare workers, yes. The tax perks, employer match, and long-term growth make it one of the best retirement tools out there. But if your plan has high fees or weak investment options, it’s worth looking at alternatives. The key is to start saving early. A senior physician once told me, ‘If I could go back, I’d start saving earlier. I always thought I’d have more time, but life gets expensive fast.’ He was still in good shape financially, but he admitted he could’ve retired years earlier if he’d just contributed a little more in his 30s. Retirement might feel far away, but trust me because future you will be very grateful.