Home Well-BeingFinancial Well-Being WHEN SHOULD retirement Planning START?

WHEN SHOULD retirement Planning START?

by partica

When you decided to become a dentist, you probably planned from your early high school years to put yourself on the proper path. First, you had to excel academically and enroll in the proper courses, then you researched a reputable undergraduate institution to maximize the odds of being accepted into a dental program. Along the way, you listened to the advice of counselors, friends and dental professionals in your community.

Eventually, you succeeded in graduating from dental school, obtained your license and perhaps your own practice. Then the challenges of running a practice took over. How to bring in new patients, how to procure and maintain the right staff, how to increase and improve your clinical skills through continuing education, learning to comply with the myriad of governmental regulations and many other challenges, including your personal life.

One step you probably did not take was planning for your retirement. Most advisors recommend starting the retirement planning process when you begin practicing. “What? Planning for retirement when I just started my career? I have no time for that. I need to concentrate on growing my practice.”

No doubt you need to concentrate on your new practice. But, planning does not mean you need to know the exact date you will retire. No one can predict that. It simply is starting the planning process, as you did for your career, to position yourself to retire when you are ready.

So, what are these steps?

1. First, when you’re ready to start your practice, make sure you make the right choice. The options are either to buy an existing practice, buy into a partnership or start from scratch. Though the reasons are many, suffice it to say that purchasing an existing practice or becoming an equity partner provides you with an established patient base and cash flow, making it the wiser choice. There is no period of growth and there’s instant cash flow to service not only the purchase of the practice but also to produce a handsome living. Starting anew can be possible but is usually an uphill trek before seeing a profit. Since you have a limited number of years to maximize your career earning potential, buying an existing practice makes more sense. This gives more of an opportunity for the second step.

2. Second, start investing in a retirement account, whether it be an IRA, 401K, profit sharing plan, or SEP IRA. An accountant who deals with dentists or a financial planner could help you with this. It’s never too early to start this process.

3. Third, watch your personal expenditures. After having gone through the grind and expense of getting your dental degree, there might be a tendency to “treat” yourself with a lavish residence or a luxury car. After all, you’re now a professional earning big dollars. The problem is that in the early stages of your career, you’re not at your peak potential to produce dentistry. Early on, you will probably earn enough to service your school debt and pay for living expenses. With the “extras” you will curtail your ability to contribute to your retirement plan. It’s best to wait for the time that you can contribute both to your retirement and be able to fund the “extra” things in life.

4. Fourth, start developing outside interests and hobbies. This can serve several purposes. It can keep life interesting outside the dental office, you can develop new contacts who may end up being your patients and as importantly, you can have something to do once you retire. In my years of helping to transition our colleagues into retirement, one of the most common reasons I heard for not wanting to retire was “I wouldn’t know what to do if I didn’t do dentistry”. The lack of outside interests locked these doctors into their practice only to watch the decline of their practice from which invariably they had to walk away. They walked away without receiving the value of their practice in dollars, potentially part of their retirement funds.

5. Fifth, if you decide to take on an associate, first make sure that you need one, and second, have a proper contract with a restrictive covenant. The lack of a restrictive covenant makes a practice unsellable in most instances. Why would a buyer acquire a practice if there is a great possibility that the associate without the non-compete can open next door and take the patients with him? In addition, banks that understand practice transitions will not finance such a purchase. It was regretful to deliver this news to someone who was ready to sell but had an associate with no restrictive covenant.

6. Sixth, don’t think “bigger is better” necessarily. At times, practitioners like to build meccas for themselves, thinking that it will attract more patients. You know, have a decorator go all out, buy all the cutting-edge equipment and so on. Unless you have the patient base that can support the outlay, spend your dollars on continuing education, hiring the right staff and marketing. Though you may produce more by going all out, your net profit will probably be less because of the greater overhead you have taken on. As you can see, early planning can be liberating. Though you may not think you can retire at age 55 or earlier, by instituting the right steps, you can have the choice if you so choose.

Dr. Berdj Feredjian is the Director of Continuing Education, Recruitment and Advanced Training for PARAGON Dental Practice Transitions, a national dental practice transition firm assisting both buying and selling dentists with their transitions needs. You may contact him at 1-866-898-1867 or berdj@paragon.us.com or visit www.paragon.us.com.

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