Most professionals have stable income because they have invested in higher education and certifications to practice their profession. However, dentists are quite different because they aren’t exactly paid per hour and don’t work nine to five. Most dentists have their own clinics where they perform their practice as a business and not simply as a job.
Regarding financial stability, dentists are pretty high earners because of their expertise. However, just because they make six-digit annual incomes doesn’t mean they don’t have to worry about their future anymore. Everyone, including dentists, needs to plan for their retirement. If you’re a dentist and want to reach the end of the road in comfort and luxury, you need to consider these things before you make a retirement plan.
1. How much are you making?
On average, dentists in the United States make around $120,000 annually. They are ranked as one of the top 10 highest earning professions in the country. However, not all dentists make the same income. Some are paid higher, especially if they have specializations like orthodontics or oral surgery. Others, particularly entry-level dentists working in corporate or nine-to-five settings, are paid lower.
2. How much are you spending?
After calculating your income, it’s time to figure out how much of that you’re expending. From your approximate $10,000 monthly income, are you spending more than 50 percent on daily expenses such as food, transportation and personal needs? How about your mortgage? Is it included in the 50 percent or a separate 10 percent? From the remaining 40 percent, how much do you spend on spontaneous expenses, such as luxuries, gifts and recreational activities? Does the remaining 20 percent go to your dental team’s payroll?
At the end of the month, it may seem like you’re spending more than what you’re earning. No matter how big your salary is, if your expenses are bigger, a retirement plan is impossible to create. What you need is to spend less than 70 percent of your income and dedicate the 30 percent solely for savings and investments, including retirement plans.
3. Do you have a solo practice or business?
A solo practitioner who has a clinic and owns the business is more likely to succeed as opposed to dentists who are only employed by corporations or other businesses. However, as a dentist-turned-entrepreneur, it’s inevitable to shoulder the expenses of your entire practice, including the rental of the clinic, utilities, dental equipment, employees and staff and marketing strategies. Other expenses involved in running a business include hiring consultants and advisors for finance and marketing. These should all be weighed in if you’re calculating for your net profits and yielding your total savings.
4. Are you planning on expanding your business?
As a dentist, your sole vision is to provide excellent dental care to your patients. However, you may decide to expand your business and build more branches of your clinic. This is a good step toward better financial security but you need to plan it carefully. Not all businesses succeed and if your second clinic fails and goes bankrupt, all of the expenses will have to be shouldered by your main clinic, which will result in losses and financial breakdown. Your retirement plan will have to remain on the back burner, increasing your years of planning and saving.
5. Do you have a successor or plan for your business after retirement?
One way of securing your financial future is by handing your business to a successor, whether it’s your own offspring or your first dental assistant whom you mentored and pushed into pursuing dentistry. Your successor will take over your business as the senior dentist, but you will still have part of the profit. However, if you don’t plan on mentoring a new dentist for your clinic, you may need to close or sell the practice once you hit retirement age.
6. Do you have someone handling your finances?
Yes, it’s your money, but if it’s as big as what you make, it may not be easy to monitor where it goes and how it’s spent. Accounting work is often not part of a dentist’s education or training, even if it’s your own income. It’s highly recommended for high-earning professionals to employ the assistance of a financial expert who can do the accounting and bookkeeping of your business. An added bonus is that most financial experts also provide sound advice about tax shelters, retirement and investments, so they can show you how to save retirement money.
7. Is your bank account actively saving money for your retirement?
It’s easy to save if you’re a thrifty person, but sometimes savings are overlooked. The solution to this problem is to create a savings account that automatically takes part of your income and saves it without accessibility for withdrawal, such as a time deposit or investment plan.
8. Do you have plans for yourself and your family?
The biggest motivation you have to get your money in order is your family. How much do you plan to leave your children by the time you retire? Are you sure you’ve fully paid off all of your debts and mortgages before you reach 60? Although most people decide to retire by 65, it’s good to give yourself some early retirement options.
As a dental professional, managing your own money can be difficult. That’s why it’s recommended that you hire a financial advisor and accountant to help you with your savings and expenses. Whether you’re an emergency dentist in Colorado Springs or a cosmetic dentist in Santa Barbara, you need proper guidance and education when it comes to retirement planning.