by David Phelps

Recent American Dental Association statistics reveal that the average retirement age for a dentist today is 68.9 years – up from age 65 years just ten years earlier. This is not a good trend, and it shouldn’t be this way!

Some of the contributing factors are lower insurance reimbursements, higher overhead costs, taxes, and regulatory compliance. However, the real issue has to do with rapid changes in the economics of the healthcare industry (it’s a business today – not a practice). Furthermore, the reliance on traditional financial models is leaving the retirement plans of many at significant risk (Wall Street and the popular 401K plans).

In addition to being a satisfying career choice, dentistry or any profession must also provide a reasonable return on time and capital investment, along with the risk and liability required to establish and operate a business. If the average age of retirement is moving to 70 years of age (which means many are working even longer), one has to question the financial model that is being used by the average dentist.

Whose Fault is It?

Years of formal education has indoctrinated the masses to believe that a “good job” in a good career or profession is the basis for a good life. Relative to much of the rest of the world, this is true. We are indeed a blessed country and populace. However, does that mean that we should settle, especially if by being more, being free, we can have a more significant impact on our families, community and the world?

Being a clinical expert and technician is no longer the means to a successful financial outcome in life. While formal education provides the skills, degree, and license to provide dental services, there is little, if any, education or training on business models, leadership and communication or financial and investing acumen. Only a small minority seek the help, find the mentors and do the extra work necessary to fill in the missing elements. The majority relinquish to random plans or fail to implement any plan at all.

The Transactional Linear Model is the Issue

Current income (lifestyle) is essential. However, the focus on transactional (active) income at the detriment of capital wealth (future bank) building comes with a significant cost.

Active income (from a job or self-employment in a small business) can produce an above-average lifestyle with many niceties – beautiful homes, cars, vacations, and private school. The problem with active income is that it is always dependent on a worker, no matter the dollar per hour transaction value.

Whether $100 or $500+ per hour, when the worker stops working, so does the income. If the worker also owns the business (a job), there is also the problem with continued overhead costs, which means taking time off is stressful both financially and emotionally. The business owner carries all of the weight.

The Failure of the Traditional Financial Model – No Cash Flow

The problem with the traditional financial model of “work hard (harder and longer), save and accumulate as much as possible,” is that there is no certainty of “how much is enough?” This simple question for which traditional financial advisors and money managers have no answer keeps already decades-long hard-working professionals at the hamster wheel of active income into their late ’60s and ’70s.

Accumulated wealth without a cash flow constantly means irregularity, unpredictability and uncertainty – which doesn’t work when one is contemplating leaving the active income career.

Most financial advisors move their clients from the stock market (volatility) to the predictability of bonds, Treasuries, CDs and annuities – with just one additional problem – the returns are relatively predictable but abysmally low. Add in the potential of higher costs of living over the next several decades, and it’s easy to understand how difficult it is for the majority to be able to consider a life after work with any peace of mind.

At Freedom Founders, we begin with a Freedom Blueprint, a customized working document that first defines non-negotiables – core beliefs and values that we will never give up or trade for money or things. Then we determine our “Financial Freedom Number” – the monthly cash flow before tax required to pay for our desired lifestyle. At that point we reverse engineer to the specific capital asset base needed to produce that income. Through our network, we are able to deploy the capital into assets that generate the annuity income without ever depleting the capital base. That’s security. That’s peace of mind.

The Fast Track – It’s About Whom You Know

Building wealth through capital asset leverage requires collaboration with others. It’s not the path that society teaches in school. It is not the model of the financial markets. For this reason, most will never venture down this road. It’s not easy or natural. However, it can be learned.

We say that “your network is your net worth.” That whom you know is more important than what you do. That’s a tough one to swallow. It’s not how we were raised to think. But it’s the truth. The most successful people in this world are not soloists. They are great collaborators, joint-venturers and strategic alliance partners.

The Road Less Traveled

Unfortunately, the realization of failed plans only becomes apparent as one reaches the age of late ’50s and ’60s – when it’s too late. Up and until that time, many believe “I’m different. That won’t happen to me. I will not be in that group that can’t retire before 70.” Statistically, most will.

The problem is not due to a lack of desire, work ethic or intelligence. It’s merely a mindset and belief system that has been passed down generation by generation. “Follow these rules, and you’ll be okay.” My observation has been, if one follows the majority, then one can expect to achieve the results of the majority. Safe? Only because no one will question you. However, a life failure if your dream was for something very different.

Are you a contrarian? Are you willing to take the road less traveled? It’s a choice. Choose wisely.

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