Working as a locum tenens professional has its perks—flexibility, higher earning potential, and the freedom to choose your assignments.
But there’s one drawback: no employer-sponsored retirement plan. Unlike full-time (W-2) employees, locum tenens clinicians are on their own when saving for retirement.
The good news? You have access to powerful retirement savings strategies that can help you build wealth even faster than traditional employees. As a locum tenens contractor, you can accelerate your savings and reach financial independence sooner with tax-advantaged accounts and higher contribution limits.
Here’s your 2025 guide to thoughtful retirement planning for locum tenens professionals.
Retirement Savings Contributions: Locum Tenens vs. Full-Time Employee
One of the most significant differences between retirement savings as a locum tenens professional and a full-time employee is the amount you can contribute to tax-advantaged accounts.
As a W-2 employee, your options are relatively limited. In 2025, you can contribute up to $23,500 to a 401(k) (or $31,000 if you’re over 50). Some employers offer matching contributions between 3% and 6% of your income based on limitations. However, they are often unpredictable and usually insufficient to accelerate your savings significantly.
Locum tenens 1099 professionals, on the other hand, have access to much higher contribution limits by combining multiple retirement accounts. In 2025, you can contribute up to:
- $70,000 to a Solo 401(k) ($77,500 if over 50), including employee and employer contributions.
- Up to $341,000 to a Cash Balance Plan, a defined benefit plan that allows for even more significant tax-advantaged savings.
By maxing out these contributions, you could save close to $1 million in just three years—a milestone that might take a W-2 employee 30 years or more to reach with a traditional 401(k).
Choosing the Right Locum Tenens Retirement Accounts
As a locum tenens professional, you can access several tax-advantaged retirement plans that significantly reduce your taxable income while building long-term wealth.
Here’s a breakdown of the best choices:
Solo 401(k)
- Why it’s powerful: Allows contributions as both the employee and employer, resulting in higher contribution limits.
- 2025 contribution limits: Up to $23,500 as an employee ($31,000 if over 50), plus up to 25% of net self-employment income, with a total cap of $70,000 ($77,500 if over 50).
- Key benefit: Offers both Roth and traditional options for greater tax flexibility.
SEP IRA
- Why it’s useful: A simple, low-maintenance option that allows contributions based on a percentage of earnings.
- 2025 contribution limits: Up to 25% of net earnings, capped at $66,000.
- Best for: Locums with variable income who want a flexible and straightforward retirement plan.
Cash Balance Pension Plan
- Why it’s impactful: Provides the highest tax-advantaged contribution limits available.
- 2025 contribution limits: Up to $341,000 annually.
- Best for: High-earning locum tenens professionals looking to maximize tax savings and accelerate wealth accumulation.
By choosing the right combination of these accounts, you can optimize your retirement strategy, reduce your tax burden, and build long-term financial security.
Flexibility: A Key Advantage of Locum Tenens Retirement Planning
Many locum tenens professionals worry their retirement funds will be locked away until age 59. However, independent contractors have more control over their retirement savings than W-2 employees:
- Self-Directed Investment Options: Unlike employer-sponsored plans with limited investment choices, locums can invest in real estate, private businesses, and other alternative assets.
- Loan Options: You can take a loan against your Solo 401(k) (within IRS guidelines and limitations) and repay yourself with interest, offering liquidity if needed.
- Roth Conversions & Withdrawals: With careful planning, you can structure withdrawals tax-efficiently, including penalty-free Roth IRA conversions.
Automate and Balance Contributions Based on Income
Locum tenens income can fluctuate, making consistent retirement contributions challenging. Here’s how to stay on track:
- Cash Flow Plan: Based on contractual locum tenens terms, schedule, and income, identify a cash-flow game plan for making tax payments, retirement contributions, benefits payments, business expenses, and other necessary expenses to ensure that cash flows somewhat steadily.
- Automate Contributions: Next, set up automatic transfers to retirement accounts to align with fluctuating income.
- Adjust Contributions Based on Earnings:
- High-Income Years: Max out Solo 401(k) and Cash Balance Plan contributions.
- Lower-Income Years: Contribute to a Roth IRA or make catch-up contributions if over 50.
Consult a Financial Advisor Specializing in Locum Tenens Physician Retirement Planning
While a CPA can guide you in selecting the optimal retirement plan—ensuring you maximize contribution limits, employer matching, and salary considerations—they do not determine how your savings should be invested for growth. That’s where a financial advisor plays a crucial role.
While the information above helps you understand the basics, navigating self-employment finances and maximizing retirement savings requires expert guidance. A financial advisor who understands locum tenens professionals can help you:
- Diversify contributions across multiple accounts.
- Reduce tax liabilities with strategic planning.
- Create a long-term wealth-building strategy tailored to your career.
Locum tenens providers have more control, higher contribution limits, and greater investment flexibility than a traditional W-2 employee. By leveraging tax-advantaged accounts like Solo 401(k)s, SEP IRAs, and Cash Balance Plans, you can accelerate your retirement savings and achieve financial independence much faster.
However, proper planning is the key to success. The Doctor’s CPA specializes in helping locum tenens professionals with self-employment taxes, retirement planning, and financial strategies tailored to their unique careers.
Schedule a consultation today to improve your financial future and fully utilize your earning potential.