I often listen to podcasts related to dentistry and financial planning. Recently, I listened to The Thriving Dentist Show with Gary Takacs on The Keys to Financial Independence. He interviewed Art Wiederman CPA who co-founded the Academy of Dental CPAs. Art has years of experience working with dentists and shared a lot of wisdom. In fact, I thought the podcast was so good that I want to share it with you. I encourage you to listen to the entire podcast (around 1 hour) but I will give you the highlights. Whether you are a young or established dentist, I know you will enjoy hearing what Gary and Art have to say.
Gary begins the segment pointing out that only 3% of dentists in the US could retire at age 65 and not reduce their lifestyle. He and Art discuss ways throughout the podcast to change that statistic.
Bonus: Dr. David Hornbrook talks for around 8 minutes on how to improve the quality of photos for patient education.
Art believes everything in life is a math problem. He has a rule called the 65/25/10 rule. That is, 65% of your income is to live on, 25% is to pay taxes and 10% is for savings. I agree this a great rule and would encourage an ultimate or eventual goal of 20% savings for a practice owner. However, Art points out the model or rule most commonly used is 90/25/-15 meaning live on 90% of income, pay 25% in taxes, and borrow 15%.
Art says that debt is the devil when it comes to credit card debt. The average person under age 40 has between $15,000 - $40,000 in credit card debt paying high interest rates such as 15-20%. It is important to avoid this and pay your credit cards off every month.
Art and Gary address a common question for young dentists. Should you buy a house first or a practice? Art recommends buying the practice first because it is going to give you the financial ability to buy the house. Gary points out that while there are many great career paths in dentistry, there is nothing like owning your own practice and experiencing entrepreneurship. He has a great story about a rancher patient who told a dentist to make sure you build the barn before the house. I agree wholeheartedly with these guys.
On the topic of retirement, Art points out that you must get in the habit of saving money. Compound interest and continual growth of your money is too great to ignore. The younger you can start even if it is a small amount, the better. A rule of thumb is that you can withdraw 4-5% of your investments annually in retirement. So, for someone with $3,000,000 in investments that would equate to $120,000 - $150,000 per year withdrawals. Also, you would have income from Social Security.
Both Art and Gary emphasize being prepared not only financially for retirement, but also mentally. You need to have something to retire to vs. retire away from. There are dental related sales or consultant jobs that dentists can transition into if they are looking to maintain significance and income in their career beyond retirement. Art recommends to look around and make connections at dental conventions if you have interest. Most importantly, what is it that you want to do. Figure that out and stay active in retirement.
Art goes over the three retirement plans he recommends for dentists. If your annual savings is between $0 - 35,000 he recommends a Simple IRA plan for your practice. If you can save more in the range of $50,000 - $90,000, then he would encourage a 401k Profit Sharing Plan. Beyond that, if you have significant savings in addition to the 401k Profit Sharing Plan, a Pension Plan allows you to save much more. I’ve seen all of these plans work. They really are great ways for practice owners to save for retirement, save on current taxes, and benefit their employees.
If you would like to discuss or learn more, schedule a call or meeting with me using the link below:
Tripp Yates, CPA/PFS, CFP®
Tripp’s passion for financial planning is evident to each and every client he meets with. His desire is to help his clients organize their finances, reduce taxes, and invest wisely. As a fee-only fiduciary advisor, Tripp strives to work in a humble and transparent way.
With extensive experience in financial planning and investment management, Tripp diligently uses his credentials of CPA and CFP® to benefit his clients. Over the last ten years, he has managed over $100 million in assets for individuals and families. In 2017, he founded Eaglestrong Financial, specializing in helping dentists and business owners. Outside of work, Tripp enjoys running, spending time with his family, and cheering on his favorite sports teams. He is an active member of Harvest Church.
Eaglestrong Financial, LLC is a Registered Investment Advisor offering advisory services in the states of TN and MS and in other jurisdictions where exempted. The information contained herein is not intended to be used as a guide to investing or tax advice. This material presented is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Past performance is no guarantee of future results.
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