Retirement Accounts for 1099 Locum Physicians: Solo 401k, SEP-IRA, and Beyond
One of the most significant financial advantages available to locum tenens physicians is the ability to contribute substantially more to tax-advantaged retirement accounts than their employed counterparts. As a 1099 independent contractor, you are both the employee and the employer — which means you can make contributions from both sides of that relationship, dramatically increasing the amount you can shelter from current taxation. Understanding which accounts are available to you, how much you can contribute in 2026, and how to choose the right structure is one of the highest-value financial decisions in a locum career.
Why 1099 Physicians Have a Retirement Advantage
An employed physician contributing to a 403(b) or 401(k) through their employer is limited to the employee deferral limit — $24,500 in 2026 plus catch-up contributions. The employer may add a match, but the physician has no control over that amount or the plan’s investment options.
A locum physician earning 1099 income has a fundamentally different set of options. As both the employee and the employer in a self-employed retirement plan, a locum physician can make contributions from both sides of the equation. The total contribution cap for a Solo 401k in 2026 is $72,000 — nearly three times the employee-only limit. For high-earning physicians later in their careers, defined benefit and cash balance plan structures can push that number significantly higher.
The practical effect is substantial. A physician who maximizes a Solo 401k in 2026 at the $72,000 cap and is in a combined federal and state marginal rate of 45% generates approximately $32,400 in current-year tax savings from that contribution alone. Over a ten-year locum career, the compounding effect of those contributions — and the deferred taxation on growth — is one of the most powerful wealth-building tools available to a physician.
The Solo 401(k): The Primary Vehicle for Most Locum Physicians
The Solo 401(k) — also called an Individual 401(k) or Self-Employed 401(k) — is the most powerful retirement account available to self-employed physicians with no full-time employees other than a spouse. It combines employee deferral contributions with employer profit-sharing contributions under a single plan structure.
2026 Contribution Limits
| Contribution Type | 2026 Limit | Notes |
|---|---|---|
| Employee deferral | $24,500 | Can be pre-tax or Roth if plan allows |
| Catch-up (ages 50-59 or 64+) | +$8,000 | Total employee deferral: $32,500 |
| Super catch-up (ages 60-63) | +$11,250 | Total employee deferral: $35,750 — verify plan supports it |
| Employer profit-sharing | Up to 25% of compensation | Effective rate ~20% of net self-employment income |
| Total cap (under 50) | $72,000 | Excludes catch-up contributions |
| Compensation cap | $360,000 | Maximum compensation considered for employer contribution calculation |
How the Employer Contribution Calculation Works
The employer side of the Solo 401k is where most of the contribution capacity lives for high-earning physicians. As a self-employed individual, your employer contribution is calculated as 25% of your net self-employment income after the deduction for half of self-employment tax. In practice, this works out to approximately 20% of net self-employment income — not 25% of gross revenue.
This distinction matters for planning. A physician with $300,000 in net self-employment income can contribute approximately $60,000 as the employer portion — plus the $24,500 employee deferral — for a total approaching the $72,000 cap. A physician with $150,000 in net self-employment income can contribute approximately $30,000 as the employer portion plus the $24,500 employee deferral, for a total of around $54,500 — still well above what an employed physician can access.
The Super Catch-Up for Ages 60-63
The SECURE 2.0 Act created an enhanced catch-up contribution for physicians in the 60-63 age window that is meaningfully larger than the standard catch-up. For physicians in this bracket, the total employee deferral capacity reaches $35,750 in 2026 — compared to $32,500 for ages 50-59. For a physician in this window who is maximizing contributions in the final years of a high-income career, this additional $3,250 in annual deferral capacity is worth taking advantage of.
Verify that your specific Solo 401k plan document supports the super catch-up provision — not all plans have been updated to include it.
The Roth Catch-Up Requirement for High Earners
Roth Solo 401(k) Option
Most Solo 401k plans can be structured to allow Roth contributions on the employee deferral side. Roth contributions provide no current-year tax deduction but grow tax-free and are withdrawn tax-free in retirement. For locum physicians who expect their tax rate to be higher in retirement than it is currently — or who have already maximized other tax deductions and want tax diversification — Roth Solo 401k contributions are worth considering.
Solo 401(k) Eligibility and Limitations
The Solo 401k is available to self-employed individuals with no full-time employees other than a spouse. If you hire any full-time W-2 employees — other than a spouse — you are generally no longer eligible for a Solo 401k and must consider other plan structures. For most locum physicians operating as solo contractors, this is not a constraint.
Solo 401k plans must be established by December 31 of the tax year for which you want to make contributions, though contributions themselves can be made up to the tax filing deadline including extensions. Do not wait until tax season to open the account for the first time.
The SEP-IRA: Simpler but Less Powerful
The Simplified Employee Pension IRA is a straightforward alternative to the Solo 401k that is easier to establish and administer but offers less contribution flexibility.
2026 SEP-IRA Limits
The SEP-IRA allows employer contributions of up to 25% of compensation or $72,000, whichever is less — the same dollar cap as the Solo 401k. However, the SEP-IRA has no employee deferral component and no catch-up contribution, which means:
- At lower income levels, the SEP-IRA contribution is smaller than what a Solo 401k would allow because there is no separate employee deferral to add
- A physician earning $150,000 in net self-employment income can contribute approximately $28,000-$30,000 to a SEP-IRA versus approximately $54,000 to a Solo 401k
- The gap narrows at higher income levels where the employer contribution approaches the $72,000 cap on its own
- Physicians over 50 receive no catch-up benefit from a SEP-IRA — another meaningful disadvantage relative to the Solo 401k
The SEP-IRA’s primary advantage is simplicity — no annual IRS filings required for most balances, contributions can be made up to the tax filing deadline, and establishment is straightforward. For physicians who want a simple retirement contribution without administrative complexity, it is a reasonable choice — but most high-earning locum physicians will leave contribution capacity on the table relative to a Solo 401k.
Defined Benefit and Cash Balance Plans: For High Earners
For locum physicians with consistently high net income — generally $300,000 or more annually — defined benefit and cash balance plans can allow retirement contributions far exceeding the $72,000 Solo 401k cap. These plans are actuarially determined based on age, years of service, and a targeted retirement benefit, and the deductible contribution can reach $100,000 to $300,000 or more annually for physicians in their 50s and 60s.
How These Plans Work
A defined benefit plan promises a specific monthly benefit at retirement. The annual benefit limit is $290,000 in 2026. To fund that future benefit, the plan actuary calculates how much must be contributed each year — and that contribution is fully deductible. Because older physicians have fewer years to fund the benefit, their required annual contributions are higher, which translates to larger current-year deductions.
A cash balance plan is a hybrid — technically a defined benefit plan but structured more like a defined contribution plan, with individual hypothetical accounts that grow at a specified crediting rate. Cash balance plans are increasingly common among high-earning self-employed physicians because they are more transparent and portable than traditional defined benefit plans while still allowing large contributions.
The Stacked Strategy for Physicians Over 50
For physicians over 50 with high and consistent net income, combining a Solo 401k with a cash balance plan can produce total annual deductible contributions exceeding $250,000 in a single year. The Solo 401k captures the $72,000 cap plus catch-up contributions, while the cash balance plan layers an actuarially determined contribution on top — the exact amount depends on age, targeted benefit, and funding assumptions. This stacked approach represents the maximum available tax deferral for a self-employed physician and is particularly powerful for those who started locum work later in their careers and want to accelerate retirement savings.
Who Should Consider These Plans
Defined benefit and cash balance plans make the most financial sense for physicians who have consistently high net income — typically $300,000 or more annually, are in their mid-40s or older, have a stable enough income to meet mandatory annual contribution requirements, and plan to continue high-income work for at least 5 to 10 years to justify setup costs.
These plans require a qualified actuary to design and calculate annual contributions, annual IRS filings, and ongoing compliance work. Administrative costs typically run $1,500 to $3,000 or more annually — but for high-earning physicians, the tax savings from larger deductible contributions far exceed those costs. This is not a plan to establish without professional guidance.
Comparing the Options
| Plan Type | 2026 Base Max | With Catch-Up (50+) | With Super Catch-Up (60-63) | Best For |
|---|---|---|---|---|
| Solo 401(k) | $72,000 | $80,000 | $83,250 | Most full-time locum physicians |
| SEP-IRA | $72,000 | N/A | N/A | Simplicity-focused, lower income |
| IRA (Traditional/Roth) | $7,000 | $8,000 | $8,000 | Supplemental — income limits apply |
| SIMPLE IRA | $17,000 | $21,000 | $22,250 | Rarely optimal for high earners |
| Defined Benefit / Cash Balance | $100,000-$300,000+ | Actuarially determined | Actuarially determined | High earners ($300k+), ages 45+ |
| Solo 401(k) + Cash Balance | $200,000+ | $250,000+ | $250,000+ | Maximum tax deferral, high income |
How Retirement Contributions Interact with the QBI Deduction
The Section 199A Qualified Business Income deduction was made permanent by the One Big Beautiful Bill Act signed in July 2025, eliminating the prior sunset provision. Locum physicians who qualify for this deduction — which allows a 20% deduction on qualified business income — should understand how retirement contributions interact with it.
Solo 401k employer contributions are treated as a business expense and reduce your taxable income — but they do not directly reduce your Qualified Business Income for QBI deduction purposes. The QBI calculation is based on your net business income before the retirement plan deduction is applied. This means retirement contributions and the QBI deduction can work together without directly offsetting each other, though the full interaction depends on your specific income level, filing status, and whether your activity qualifies for the full deduction.
For physicians operating through an S-Corp, the reasonable salary you pay yourself is excluded from QBI — only the distribution portion qualifies. Retirement contributions made through the S-Corp structure do not change this fundamental treatment, though they do reduce the overall taxable income flowing to your personal return.
This interaction is nuanced enough that it should be modeled specifically for your situation by a CPA before you finalize your retirement contribution and business structure strategy. For a full breakdown of the S-Corp election for locum physicians, see our S-Corp Election guide.
Practical Steps to Get Started
If you are currently earning 1099 locum income and do not have a self-employed retirement plan in place, the most important step is to establish one before December 31 of the current tax year. Every year you delay is a year of contribution capacity — and tax deferral — you cannot recover.
For most locum physicians, the Solo 401k is the right starting point. Major brokerage platforms including Fidelity, Vanguard, and Schwab offer Solo 401k plans at no cost. The setup process is straightforward and can typically be completed online. What matters more than which brokerage you choose is that you establish the plan before the year-end deadline and begin making contributions.
The decision between a Solo 401k and a SEP-IRA comes down primarily to income level and administrative tolerance. At incomes above $150,000 in net self-employment income, the Solo 401k will almost always allow larger contributions due to the separate employee deferral component. At lower income levels the difference narrows, but the Solo 401k’s catch-up provisions still favor it for physicians over 50.
The decision to add a defined benefit or cash balance plan requires professional analysis. Engage a CPA or financial advisor who works specifically with self-employed physicians and understands the interaction between defined benefit funding requirements, Solo 401k contributions, QBI deduction eligibility, and your specific income pattern.
The Bottom Line
The retirement account advantage available to locum physicians is real and substantial — but only if you use it. A physician earning $300,000 in net locum income who maximizes a Solo 401k and works with a tax advisor to optimize the QBI deduction and business structure can shelter $72,000 or more annually from current taxation while building retirement assets that compound tax-deferred. A physician who earns the same income and contributes nothing pays taxes on every dollar and builds wealth entirely in taxable accounts.
The mechanics are not complicated once you understand the structure. The most important action is to start — establish a plan, make contributions, and build the professional relationships that allow you to optimize the strategy as your income grows.