Retirement might seem far off, but trust us—time flies, and the last thing you want is to be scrambling to figure out your finances when you’re ready to slow down.
As a dentist, you’ve spent years building your practice and earning a solid income, but eventually, you’ll want to (or need to) work less. When that happens, will you have enough saved to maintain your lifestyle? Or will you be forced to keep working just to make ends meet?
The good news?
There are smart ways to set yourself up for a comfortable retirement, and they’re not as complicated as you might think. We’ve put together the most important retirement strategies for dentists, ranked from what you should do first to the nice-to-haves.
Start at the top, make sure your bases are covered, and then layer in additional strategies to build long-term security. Let’s dive in.
1. Maximize Retirement Account Contributions
Having retirement savings isn’t just about stashing money away, but making your savings yield more returns for you. The best way to do that is by maximizing contributions to tax-advantaged accounts like a 401(k), SEP IRA, or even a cash balance pension plan. These accounts let you lower your taxable income while growing your savings faster through compound interest.
If you’re not maxing out your contributions each year, you’re leaving money on the table that could be funding your future lifestyle. The more you put away now, the more financial freedom you’ll have when it’s time to step away from your practice.
2. Plan for Healthcare Costs in Retirement
Growing old means costly healthcare expenses, and it’s not something you want to figure out at the last minute. Opening an HSA is a tax-free strategy that lets you save up for future medical costs. You should also look into long-term care insurance and Medicare options early, so you’re not scrambling when the time comes.
Without proper planning, unexpected medical bills can eat into your retirement savings faster than you’d expect. Having a strategy in place means you can focus on enjoying retirement instead of worrying about how to pay for care.
3. Consider a Cash Balance Pension Plan
A cash balance pension plan might be worth considering if you’re making good money and want to supercharge your retirement savings. It allows you to contribute far more than a traditional 401(k), reducing your taxable income while building a sizable retirement fund. These plans are ideal for dentists who are getting closer to retirement and need to catch up on savings. Since the growth is predictable, you won’t have to stress about market fluctuations affecting your retirement income. This strategy gives you the best of both worlds—tax savings now and a reliable income stream later.
4. Diversify Investments Beyond Your Practice
They say, “Don’t put all your eggs in one basket,” and this basket is your dental practice. When the practice fails, all else fails and your retirement is as good as nothing. But diversification like investing in real estate, stocks, or even private equity, ensures you have multiple sources of income when you stop practicing.
A well-diversified portfolio protects you if the value of your practice doesn’t hold up when it’s time to sell. The key is to start early and spread your investments across different asset types for steady long-term growth. This way, you’ll have financial security no matter what happens with your practice.
5. Establish Passive Income Streams
Passive income makes retirement feel easy because you still earn while you’re doing nothing. Rental income, dividends, and part-time consulting fees are ways for you to earn while enjoying retirement. The sooner you start buying assets that can generate passive income, the higher value they’ll become in the next 10 to 20 years, depending on when you retire.
6. Leverage Life Insurance for Retirement Planning
Life insurance is a powerful retirement tool, not just a safety net in case something happens to you. It’s only beneficial if you picked the right insurance policy, such as a whole or indexed universal life insurance, where you can build cash value that you can borrow against later.
This can provide tax-free income in retirement while also ensuring your loved ones are taken care of. If set up correctly, it’s an extra layer of financial security that can supplement your other investments. It’s a long-term play, but it can pay off when you need it most.
7. Reduce Debt Before Retirement
Carrying debt into retirement makes everything more stressful and eats into your savings faster. Paying off high-interest loans first and gradually eliminating other debts before you retire frees up more of your income for things that actually matter. The goal is to enter retirement with as little debt as possible so you can enjoy your money instead of sending it to lenders.
8. Sell or Transition Your Practice
If you think you’ve already fulfilled your life’s work and are ready to move on to retirement, selling or transitioning your practice can be your last hurrah. This option can give you lots of cash, especially if you’ve cultivated its value over the years.
However, rushing the process could leave you with a lower valuation or a buyer who isn’t the right fit. If you prepare early, you’ll have time to increase profitability, reduce overhead, and make your practice more attractive to buyers.
Make Your Retirement Plan Work for You
Retirement planning isn’t just about setting money aside—it’s about making sure you have a solid plan for both your personal wealth and your practice’s financial future. Whether it’s maximizing tax-advantaged accounts, setting up a pension plan, or making sure your practice is ready to sell when the time comes, these strategies can set you up for long-term security.
That’s where we come in. At Core Advisors, we specialize in helping dentists and CPAs take control of their finances, both personally and professionally. From tax planning and retirement strategies to practice accounting and financial management, we make sure you’re covered from every angle.
If you’re ready to build a retirement plan that actually works for you, let’s talk.
Simply head over to our Get in Touch page to schedule a call with us today.
We’re always here to help!
