From Dental Economics
More than 31 percent of solo practicing dentists today are 55 years or older. Since most dentists have traditionally retired between the ages of 60 and 69, retirement is a “hot” topic. Financial advisors feel you will need from 70 to 90 percent of your current net income in retirement. Yet, the baby boomers (now 44 to 59 years) have reinvented each phase of their lives, never matching what has been customary. What will retirement be like for the boomers? What will be right for you?
Goal-setters who have planned for retirement since they began their careers have accumulated five times more than what a non-planner has saved. An ADA survey indicates dentists save 10.6 percent of their income, which is below the federal limit of a 15 percent contribution to a qualified pension fund.
The average dentist’s net income in 2001 was $173,000. In retirement planning, 80 percent of that is $138,400, or $11,500 a month. If you retire at age 60 and live another 30 years, you would need to accumulate $4.1 million from interest and savings.
The figures are staggering for the unprepared. What are the choices for today’s boomer dentist? Selling the practice? Forming a partnership or associateship? Practicing in a different way?
If you can find a buyer, a sale is worth about 18 months of net income, which is then taxed for capital gains and depreciation. Although this seems like a simple statement, you must be aware that a sale is final. You are no longer a dentist in that location once you sell your practice. There is no going back. The book is closed!
Partnerships in retirement have their own sets of pros and cons. If you review the reasons why you entered the profession of dentistry in the first place, you may find independence and freedom on your list. Selling half your practice to an unknown partner means you have surrendered your freedom and half your net income in exchange for nine months of net income. The staff will still look to you for leadership and details.
Becoming an associate after 30 years of private practice could be successful, if you have the qualities to be an employee. Will you be happy doing dentistry for someone else? Do you have the qualities to be a team player under someone else’s leadership and rules?
Continuing to practice in a different manner is another viable alternative. You can continue to feel needed and serve others on your own terms. We call it “Retire As You Go,” and the absolute to making this work is that you enjoy dentistry. This is a program for the optimist, the eager, and the bright. This is for doctors who want to learn the latest thing and continue to be involved.
There are some real advantages to keeping your practice viable. Currently, if you have a $1,000,000 practice, you can deduct about $50,000 of expenses, which include a leased car, continuing education travel, entertainment expenses, and other related items. Upon selling your practice, these after-tax expenses are now yours. Another big advantage is the psychology of your earned status in the community.
Why not take advantage of the qualities which drew you to dentistry in the first place? These factors might include independence, freedom from outside control, leading your own destiny, and earning more money, especially if you did not accumulate a “bundle.”
In this form of dental practice, you design your ideal practice days, plan your continuing education around travel adventures, and attract a staff to work your schedule. You may want to work three days a week for three weeks, and then take the fourth week off. If you can continue to work on your own terms, netting $150,000 and not having to use your retirement funds until you choose, count the advantages and your blessings.
It is true – the value of your practice may decrease. Weigh this – practicing another 10 to 15 years making $1,500,000 against the original final selling price of 18 months of net income. I have a number of excellent boomer dentists who are reinventing “retirement” under their own terms. Are you interested in being one of them?
Dentistry offers the greatest possibilities for choices, even in retirement. If you enjoy dentistry and want to continue feeling needed and wanted, consider “Retiring As You Go.”
