Exit Right 4 U?
From Dental Economics
More than 31 percent of solo practicing dentists today are 55 years or
older. Since most dentists have traditionally retired between the ages
of 60 and 69, retirement is a “hot” topic. Financial advisors feel you
will need from 70 to 90 percent of your current net income in
retirement. Yet, the baby boomers (now 44 to 59 years) have
reinvented each phase of their lives, never matching what has been
customary. What will retirement be like for the boomers? What will be
right for you?
Goal-setters who have planned for retirement since they began their
careers have accumulated five times more than what a nonplanner
has saved. An ADA survey indicates dentists save 10.6 percent of
their income, which is below the federal limit of a 15 percent
contribution to a qualified pension fund.
The average dentist’s net income in 2001 was $173,000. In
retirement planning, 80 percent of that is $138,400, or $11,500 a
month. If you retire at age 60 and live another 30 years, you would
need to accumulate $4.1 million from interest and savings.
The figures are staggering for the unprepared. What are the choices
for today’s boomer dentist? Selling the practice? Forming a
partnership or associateship? Practicing in a different way?
If you can find a buyer, a sale is worth about 18 months of net
income, which is then taxed for capital gains and depreciation.
Although this seems like a simple statement, you must be aware that
a sale is final. You are no longer a dentist in that location once you
sell your practice. There is no going back. The book is closed!
Partnerships in retirement have their own sets of pros and cons. If
you review the reasons why you entered the profession of dentistry in
the first place, you may find independence and freedom on your list.
Selling half your practice to an unknown partner means you have
surrendered your freedom and half your net income in exchange for nine months of net income. The staff will still look to you for
leadership and details.
Becoming an associate after 30 years of private practice could be
successful, if you have the qualities to be an employee. Will you be
happy doing dentistry for someone else? Do you have the qualities to
be a team player under someone else’s leadership and rules?
Continuing to practice in a different manner is another viable
alternative. You can continue to feel needed and serve others on your
own terms. We call it “Retire As You Go,” and the absolute to making
this work is that you enjoy dentistry. This is a program for the
optimist, the eager, and the bright. This is for doctors who want to
learn the latest thing and continue to be involved.
There are some real advantages to keeping your practice viable.
Currently, if you have a $1,000,000 practice, you can deduct about
$50,000 of expenses, which include a leased car, continuingeducation
travel, entertainment expenses, and other related items.
Upon selling your practice, these after-tax expenses are now yours.
Another big advantage is the psychology of your earned status in the
community.
Why not take advantage of the qualities which drew you to dentistry
in the first place? These factors might include independence, freedom
from outside control, leading your own destiny, and earning more money, especially if you did not accumulate a “bundle.”
In this form of dental practice, you design your ideal practice days,
plan your continuing education around travel adventures, and attract
a staff to work your schedule. You may want to work three days a
week for three weeks, and then take the fourth week off. If you can
continue to work on your own terms, netting $150,000 and not having
to use your retirement funds until you choose, count the advantages
and your blessings.
It is true - the value of your practice may decrease. Weigh this -
practicing another 10 to 15 years making $1,500,000 against the
original final selling price of 18 months of net income. I have a number of excellent boomer dentists who are reinventing “retirement”
under their own terms. Are you interested in being one of them?
Dentistry offers the greatest possibilities for choices, even in
retirement. If you enjoy dentistry and want to continue feeling needed
and wanted, consider “Retiring As You Go.”
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