Building a Solid Financial Foundation

The average retirement age for a dentist is 69, according to Dental Economics. This is seven years more than those in other professions. Whether you are nearing retirement or just beginning your career, one of the most important things you can do for your financial future is build a retirement plan. 

A comprehensive retirement plan for dentists should consider future trends as well as ways to maximize your revenue now. From wise investing to estate planning, there are a variety of options you can leverage to secure your financial future as a dentist. 

One of the most important steps in the process of building a solid financial foundation is understanding your cash flow. This allows you to budget accordingly. Pay attention to your spending by considering your fixed expenses, discretionary spending, and ideal future savings. 

What are your debts? Take inventory of any current personal debts you have, as well as debts that affect your practice, and when you expect to be able to pay them off. This will give you an idea of the kind of financial goals you should have for your practice each year.

Emergency funds also come into play, as does insurance. What would happen if an injury or illness prevented you from working? Disability insurance and life insurance are important aspects to include when creating your dental retirement plan. You also need to invest in health insurance that will cover you even after you retire. 

The Retirement Landscape for Dental Practice Owners

Business evaluations and practice transitions are some of the special challenges that dental practice owners face. A big concern is succession and whether that means leaving your practice to a family member or selling it to an investor or another dental professional. 

The transition should also take place at the right financial time so that you can maximize your practice’s worth. If you’re planning on selling it to an investor or dental professional, this means selling during a growth trend.

It’s also essential to consider the tax implications of passing down or selling the practice. You need to know if the buyer will pay you all at once or if they will use a combination of financing, equity, and cash. The various options will affect your taxes in different ways, therefore impacting your retirement funds. 

Early retirement planning offers you the chance to make better investments and to start growing the money you set aside. You can begin earning higher returns on those investments as well.

Investment Strategies

Smaller amounts of money invested early offer an ideal opportunity for a significant payout when you reach your retirement age. Higher-risk investments are generally better early in your dental practice than later. 

Investing in real estate can provide dental practice owners with passive income and diversification. You may also want to consider purchasing your practice’s location. Not only does this eliminate leasing costs, but it also adds value to your practice. 

Stocks and bonds are also solid investment strategies to consider. Keep in mind that stocks generally offer better long-term results when compared to bonds, but they also come with higher risks.

Stocks may be a better option to invest in early in your career. Bonds tend to be more stable but offer lower long-term results. For many people, investing in a mixture of stocks, bonds, and retirement accounts is the best option.

Estate Planning and Wealth Transfer

Estate planning is essential to protect your wealth. This requires doing a careful inventory of your estate and considering your loved ones’ present and future needs. Make sure to write a will that includes details on your dental practice. Estate planning helps ensure a smooth transition of assets to your heirs. 

An estate-planning professional can walk you through your state’s tax laws and what they mean when it comes to your dental practice. Start your estate planning early in your career, and continue to review and update all of the official paperwork regularly. 

In some cases, a trust is also a good option, especially if you have descendants who are not of age yet. A trust allows a third party to hold assets on behalf of a beneficiary. 

You want to avoid a probate process for your dental practice once you’re no longer there. A trust can help your heirs skip this process, too, saving time and money. Without estate planning, you won’t be able to prevent your practice from being undervalued before it’s sold off.

A proactive retirement plan is key for a secure financial future.

A retirement plan for dentists can help you enjoy your retirement years while also making it easier to transfer your wealth and practice later on. Investments are always wise, and that means investing in yourself and your practice. One way that you can invest in your practice is by taking orthodontic courses. Expanding your services to cover both general dentistry and orthodontics can significantly boost your practice’s worth. Contact the American Orthodontic Society to sign up for our courses today.