By: Erick Cutler
Retiring from your dental practice is a process, but it isn’t one that has to be overly complex.
You’ve put a lot of work into building your practice, and the last thing you want to do is miss out on retiring on your own terms simply because you got lost in all the complexities of the retirement process. Thankfully, dental retirement can be broken down into two important areas of focus, and we want to walk you through those today.
It’s tempting to jump right into talk of numbers and account balances, but don’t get ahead of yourself. Laying out your views and expectations around retirement is the foundation of a positive and successful exit from your practice.
First, accept where you are. You can find all sorts of charts laying out ideals for where you should be in your retirement planning, but the position that matters most is where you stand today.
Second, understand where you’re going. We’ll touch on what that means in terms of numbers in a bit, but before you start reviewing account statements, have an honest conversation with yourself and your family about your lifestyle goals and detailed retirement expectations.
More than anything, particularly in this foundational stage of retirement planning, you need to resist the temptation to compare. That’s mean comparing everything: your practice, your retirement savings, and your travel itinerary after you step away. The biggest mistake you can make at this point is to try to step out of your practice and into someone else’s life.
Once you’re able to articulate your retirement goals, it’s time to start putting them into numbers.
Financially you will need to sit down and consider multiple factors including:
- The cost of your new lifestyle: You can expect to see a drop in expenses such as mortgage and gas/car insurance, but don’t forget the costs you’ll be taking on to keep busy in your free time (such as travel and dining) not to mention medical expenses that are likely to creep up as you age.
- Income generated from selling your practice: If you’re anywhere within five years of considering retirement, you’re probably contemplating selling your practice. That process can be an involved one, so if you’re not already, start speaking with a financial planner (experienced in dental) who can discuss time lines, tax implications, and also help you structure a sales agreement that will contribute to the most beneficial sales results possible.
- How long you’ll live: Though the average lifespan is around 80 years, because of breakthroughs in medicine, it’s not unreasonable for a healthy person retiring at 65 to expect to live to 100. It’s better to plan for too many years than too few, so keep that in mind when shaping out your financial goals.
- What your portfolio looks like: This is another area where a good financial planner is crucial. You will want to partner with him or her to estimate the average annual rate of return for all of your savings and investments and to then see how those line up with the points we’ve previously covered. Ideally, you’re looking to build a portfolio that is balanced to help you outpace inflation (Side note: this will likely mean a decent amount of equity exposure).
- How you treat your portfolio: Of course, making withdrawals from your portfolio can drastically impact how long you’re able to live off those funds. Discuss appropriate withdrawal rates with your planner, remembering to discuss any gifts you’re planning to leave to charities and heirs. While you’re having this discussion, make sure to cover options such as charitable trusts and insurance.
If you keep these two perspectives in mind as you work through your retirement, you’re much more likely to transition smoothly into your post-practice life.
Looking for more details on retirement and your finance options? We recommend this article as a starting point.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.