What do you visualize when you say retirement? Some visualize Caribbean cruises, others see fly fishing in a mountain stream, while others see nothing at all. I visualize flying an open cockpit biplane. For anyone hoping to retire in some level of comfort and confidence, here’s what you need to consider before you lock the office door and throw away the key.
Most dentists look forward to the freedom to pursue other facets of life beyond running a business and practicing dentistry. Whether your goal is just to get the job done or you still want to be in the office, most retirees notice that they suddenly have more free time. You have the same 1,440 minutes per day, but how you handle it is the difference. You are now in control and your choices will determine how you feel about your life.
Over the years, I have met many people who are happy to be done with work, but who are not happy to retire. They complain about all sorts of things, including boredom. This is because they missed a key part of the retreat –preparation.
Retirement: Ready or not?
The New Retirement Rules: 8 Major Changes Dentists Need to Know About
If work is your life, then you have plenty of preparation for a happy retirement. Before you end work, figure out some things you like to do or want to try when you have more time. My unfortunate retired friends usually don’t have vocations to replace their vocations.
Are you financially ready to retire?
This question is important but not the only concern. A recent survey by the American Dental Association (ADA) found that dentists need funds from four different sources to retire.1 These expected sources of income include private savings such as an IRA, simplified employee pension or 401(k) (62.4%); social security (13.4%); practice sale (12.7%); and others (12.5%).1
Take the time to sit down with your spouse or partner and do the math. Take a realistic look at your goals, health, and life expectancy. Do you want to leave a financial legacy for your children or a community charity? This will have an impact on your spending habits in retirement. Financial planners use the “4% rule” as a rough estimate of expenses if you don’t want to deplete your savings over your lifetime.2
No matter where you are on the road to retirement, consider using the services of a paid financial planner. Financial advisors say only 50% of dentists have determined the retirement savings needed to maintain their lifestyle.3 Until the pandemic, data showed that dentists were only saving around 3% for retirement when the ideal rate is closer to 10%. Dentists, and professionals in general, have good cash flow. However, we tend to earn and spend, not earn, save and spend. It is a matter of choice and habit which is under our control.4
Unfortunately, only 26% of dentists use a Certified Financial Planner (CFP).2.5 Seeking help from a certified and trusted financial professional can help you better understand your options, including saving in a way that offers tax advantages, staying invested after making the required minimum distributions, and evaluating your practice with a view to your transition. While you can find a professional transition service that meets all of your needs, these services often call for a specialist for atypical cases, and that’s something you can do.
The most important thing is that you pay for an outside opinion on your situation in an ever-changing area of the financial world. One resource that has a wealth of information online is dentist advisors.6 A financial planner should ask very personal questions because they can’t help you if you don’t disclose all of your information. Ultimately, you need to determine when it’s right for you to enter the ranks of retirees.
Money is not the main obstacle
You don’t need a lot of money to be happy in retirement. On the contrary, if you are happy, you will find a lifestyle that fits your budget. That’s why it’s so important before retirement to set goals, both personal and financial, and to include your spouse or loved one in the discussion.
A good financial planner or consultant will help you with this. An important issue is selling your practice. You can no longer expect a significant increase in your retirement savings from the sale of your practice. Young doctors leave school with such high debt that it is often impossible or rational to obtain financing for the purchase of a practice. In today’s market, there are more sellers than buyers. So what you might have counted on to increase your net worth from the sale probably won’t be what you hoped for.
In fact, many practices do not sell at all. This is one of the reasons why the average retirement age for dentists has increased. In 2005, the average dentist retired at around 66 years old. In 2018, that number rose to 69!seven Dentists work a few more years and accept that their practices do not sell.
Consider working longer
One of the key points I have discussed with dentists is whether you should retire. I’ve seen dentists who had good planning and solid finances become disgruntled and angry in retirement. If you are enjoying your practice and your health allows you to continue practicing, perhaps retirement is not for you.
If you don’t have a hobby, if you don’t have a social circle outside of your peers, and your life revolves around your practice, you may be happier never to retire.
There are several options. If you can provide excellent care and your office layout allows you to be profitable, consider working only two days a week. Your practice will become smaller and you can retire. If you have an associate or partner, consider working only one week per month. These arrangements require skilled personnel and mutual discussion with all parties involved (physician, staff and patients) to be successful.
Soft skills have value
When you retire, your behavioral skills and emotional intelligence are the keys to enjoying life. I suggest building on the things you already enjoy doing, including personal time and time spent together. Look for a new challenge: learn a new language, take a class at the local college, or try gardening. If you’re not already a member of a service club or similar group, now is the time to give it a try. This may sound like a Pollyanna approach, but it has psychological merit.
The happy retirees I’ve met talk more about the new friends they’ve met than about themselves. They are outward looking and not self-centered. It seems my less happy retired friends assumed the world would revolve around them in retirement, and maybe that’s how it was at their jobs. In the real world, the world revolves around the active listener.
Create a schedule and volunteer
If you used to get up at 5:30 a.m. and liked it, don’t change. But now get up and do something you didn’t have time to do in the past. Take a walk or go swimming. Set aside time alone and with your spouse. Go to church at the same time on Sundays.
If you miss dentistry and want to give back, consider applying for an assistant position at a dental school. If you’ve enjoyed the business side of your practice, consider volunteering with SCORE, a volunteer organization to help small business owners.8
Those preparing for retirement have busy days. Those who let retirement sneak up on them are bored. Keep in mind that your funeral should be a celebration of a life well lived. People usually won’t remember how much money you had. They will remember the time you helped someone or the fund you created for a local foundation. Don’t retire, start over and do something good for others and yourself.
Editor’s note: This article originally appeared in the September 2022 print edition of Dental economy magazine. Dentists in North America can take advantage of a free print subscription. Register here.
1. Levin PR. The 10th anniversary of the Dental economy-Annual Levin Group Practice Research Report. Dental economy. September 22, 2016. Accessed September 19, 2018. https://www.dentaleconomics.com/macro-op-ed/article/16387996/the-10th-anniversary-of-the-dental-economicslevin-group-annual-practice – research report
2. Kawashima C, Williams R. Beyond the 4% Rule: How Much Can You Spend in Retirement? Schwab. March 7, 2022. https://www.schwab.com/resource-center/insights/content/beyond-4-rule-how-much-can-you-safely-spend-retirement
3. Pride JR, Hufford BC. On your marks, get set, retire! Dental economy. June 1, 2001. https://www.dentaleconomics.com/money/article/16389876/ready-set-retire
4. Isaac R, Mulcock M. 7 mistakes dentists make that ruin retirement. The Dentist Money Show Podcast. #298. https://dentistadvisors.com/education-library/podcast/7-mistakes-dentists-make-that-ruin-retirement/
5. Levin RP. A Profession in Transition: Results from the 2018 Dental Economics–Levin Group Annual Practice Survey. Dental economy. October 1, 2018. https://www.dentaleconomics.com/practice/overhead-and-profitability/article/16385046/a-profession-in-transition-findings-from-the-2018-dental-economicslevin-group-annual- survey-practice
6. Financial planning and investment management for dentists. Dental Advisors. www.dentistadvisors.com
7. Increase in the pension of dentists. American Dental Association. https://www.ada.org/-/media/project/ada-organization/ada/ada-org/files/resources/research/hpi/hpigraphic_dentist_retirements_increase.pdf
8. MARK. https://www.score.org